The US Research & Development Tax Credit

What Is The R&D Credit?

Every year, thousands of companies claim more than $10 billion in federal R&D tax credits. A significant percentage of those taking advantage of this benefit are small to medium-size companies. The R&D credit was first introduced in 1981, but has been getting more powerful ever since, and was recently made permanent in 2015.

Despite the upside of the credit, billions go unclaimed each year, because companies simply aren’t aware, or are misinformed. If you are a company that develops new or improved products, processes, or software, you could qualify for a federal (and state) tax credit.

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What are my qualified expenses?

  • W2 wages for US-based employees involved in R&D activity
  • Supplies and materials used in R&D activity
  • Fees paid to US-based sub-contractors

Do I qualify for credits?

Your business can qualify for a credit regardless of its size, as long as you are involved in qualified activities such as:

– Developing processes, patents, formulas, techniques, prototypes, or software

– Improving or redesigning existing products

– Hiring scientists, designers, or engineers

– Devoting time and resources to creating (manufacturing or developing) new or innovative products

– Developing patents, in other words, intellectual property

How can I use my credits?

– Reduce your Federal and/or State tax liability (in past years as well).

– Reduce your FICA payroll tax liability up to $250,000/ year. Company must be under 5 years old, as well as pre-revenue OR have less than $5 million in gross receipts for the tax year.

– Apply against Alternative Minimum Tax (AMT) beginning January 1, 2016.

– Federal credits carry forward for up to 20 years.

We can help you claim the R&D tax credit

Our consultation costs you nothing. We will explain how the R&D tax credit works, gather some information about your company and give you estimates on what your federal and state credits could be.

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