Tell Me About the R&D Tax Credit

About the Credit

The R&D Tax Credit (26 U.S. Code §41), also known as the Research and Experimentation (R&E) tax credit, is a federal benefit that provides companies dollar-for-dollar cash savings for performing activities related to the development, design, or improvement of products, processes, formulas, or software.

Benefits:

  • Credit Against Tax Owed. NOT a deduction.
  • Federal credits can be as much as 14% of qualified costs.
  • Credit is a choice of calculations based on expenditures associated with qualifying activities.
  • The credit can be claimed every year and for up to 3 prior tax years. Amend 3 years back from filing
  • Excess credits can be carried back 1 year or carried forward 20 years.
  • IRS Form 6765

Is My Business Eligible?

The R&D credit is much broader than many companies realize, extending beyond product development to include activities such as the latest manufacturing methods, software development and quality improvements. Even Start ups may be able to utilize the R&D Credit against their payroll tax for up to 5 years.

Your company may be eligible if you perform these activities:

  • Devote time and resources to creating new or innovative products
  • Develop or improve existing products, processes, techniques, software
  • Implement system integrations to improve performance, efficiencies, cost
  • Hire outside providers to support any of the above

What expenses qualify for the credit?

The R&D credit is much broader than many companies realize that extend beyond product development to include activities such as the latest manufacturing methods, software development and quality improvements. Even Start ups may be able to utilize the R&D Credit against their payroll tax for up to 5 years.

Does your company:

  • Wages (W2 Box 1 wages,1099)
  • Outside Contractors (US based and supporting your Qualified Activities)
  • Supplies (scrap, parts/components)
  • Computer (costs associated with software development/testing)
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RandD Tax Credit

Our Process

We begin the process with a no-cost feasibility consultation in which we explain details about R&D Tax Credit. Our experts will then help you determine whether your business qualifies for the credit and how to use it through the following steps:

  • Identify your company’s qualified research activities.
  • Gather the necessary financial documents.
  • Provide an estimate of your federal and state R&D tax credits.
  • If we agree, we begin the work.