Research & Development Tax Credit

Tax savings for work you’ve already done

R&D Tax Credit

You've invested in your business. It's time to claim your credit.

The R&D tax credit is available to any U.S. business that spends time and resources on new development, improvements, or technological advancements in effort to improve upon its products or processes. The credit can also be available to American Business owners that have improved upon the performance, functionality, reliability or quality of existing products or trade processes.

  • What's the benefit?

    The R&D tax credit creates money that goes back in your company’s pocket to fuel further innovation and growth.

  • Why haven't I heard of this?

    The credit has been around since 1981, but many companies couldn't take advantage of the tax incentive until 2015.

What type of R&D activities qualify?

Qualified research activities are defined by the four-part test outlined below.

  • Technological in Nature

    Activities must fundamentally rely on the principles of physical or biological science, engineering, or computer science. 

  • Permitted Purpose

    Activities must be performed in an attempt to improve the functionality, performance, reliability, or quality of a new or existing business component.

  • Eliminate Uncertainty

    Activities intended to discover information that could eliminate technical uncertainty concerning the development or improvement of a product. 

  • Experimentation

    All of the activities must include a process of experimentation including testing, modeling, simulating, systematic trial and error. 

Encouraging innovation in businesses across the United States.

The U.S. tax court and states alike have ruled in favor of business activities that make jobs faster and more efficient. This could be anybody from a contractor who uses new materials to create green, energy efficient improvements, to a manufacturer improving production processes through investment in new technology.

 

The R&D tax credit is now available to any U.S. business that spends time and resources on new development, improvements, or technological advancements in effort to improve upon its products or processes. The credit could also be available to American Business owners that have improved upon the performance, functionality, reliability, or quality of existing products or trade processes.

 

>> Learn more about the history.

senator chuck grassley

"Too often small and medium businesses just simply are not taking advantage of the R&D... 90% of life is just showing up. The same is true with tax. Business owners should learn about the tax incentives available for you. These incentives can help your business succeed and thrive."

 - Senator Chuck Grassley, speaking about the R&D tax credit
Hear the full speech.

Man working in printing factory
Young woman having her teeth checked during dental appointment at dentist's office.
The man oversees the cockroach

Recent Tax Credit Examples

  • $148,000 - Dentist

  • $18,000 - Printing Company

  • $1,200,000 - Agriculture Farmer

R&D Tax Recovery Qualifications

What might qualify?

  • Wages paid to employees for qualified services

    This includes amounts considered to be wages for federal income tax withholding purposes.

  • Basic research payments

    Payments made to qualified educational institutions and various scientific research organizations, allowable up to 75% of the actual cost. 

  • Supplies

    This may include any property not subject to depreciation used and consumed in the R&D process.

  • Third party contract expenses

    This includes expenses for performing QRAs on behalf of the taxpayer, regardless of the success of the research, allowable up to 65% of the actual cost.

Who qualifies?

The R&D tax credit may apply to any taxpayer that incurs expenses for performing Qualified Research Activities (QRA) on U.S. soil. The credit is a percentage of qualified research expenses (QRE) above a base amount established by the IRS in a four-part test:

  • Elimination of Uncertainty

  • Process of Experimentation

  • Technological in Nature

  • Qualified Purpose

Qualifying Industries

Aerospace
Agriculture
Animal Hospitals
Apparel
Architecture
Automotive
Biotech/Life Sciences
Breweries/Wineries
Civil Contractors
Coatings and Adhesives
Chemical
Commercial Bakeries
Construction
Dental Practices
Distribution
Electricians
Electronics
Energy
Fabricators
Farming
Food Processors
Food Products
Furniture Makers
HVAC
Insurance
Jewelry Design
Job Shops
Medical Devices
Oil and Gas Refineries
Package Design
Pharmaceuticals
Plastic Injection Molding
Real Estate Agencies
Research and Development Facilities
Staffing Agencies
Telecommunications
Tool and Die
Transportation

You could be leaving thousands of dollars behind.

Many misconceptions surrounding the new regulations are that it is difficult to apply for the credits and that it is restricted to a small group of industries. This could not be further from the truth. The business tax incentive process is easier to navigate and you may be able to go back three years to file for credits that were earned but not claimed. 

 

Now is the time to work through the Business Qualification Process and see if you have left some valuable business incentive credits on the table.