Research and Development Tax Credits

[Julio Gonzalez]

Did you know that less than ⅓ of companies that are eligible for R&D tax credits realize they qualify?

What is an R&D Tax Credit?

The research and development credit (also known as the research and experimentation tax credit) is one of the most significant U.S. tax credits under the current law. It’s a tool that helps companies maximize their cash flow and bottom line. This tax credit is a federal benefit that saves companies money for implementing activities such as improvement, design or development of software, processes, formulas or products. Companies can reduce their federal payroll taxes, specifically the employers portion of Social Security taxes.

What Businesses Qualify for R&D Tax Credits?

Companies that generate less than $5 Million in process receipts this year and no more than 5 years of gross receipts. A few types of businesses that qualify:

• Engineering and architectural firms
• Construction contractors
• Plastic Mold injection
• Agribusiness

What Activities Qualify for the R&D Tax Credit?

The product does not need to be new to the company’s industry, it simply needs to be new to the company itself. Here are some examples:

• Schematic Design Development
• Development of energy-efficient features that are unique
• Development of elevated drawings for planning
• Development of plans that meet specific/unique load requirements
• Use of Alternative materials that meet certain requirements or improve design.
• Value engineering
• Design that is sustainable
• Environment design
• New material testing
• Environmental impact studies
• Determination of substitute HVAC systems or improvements to the systems
• Determining alternative structural design
• Developing or improving lighting

Have you utilized any R&D tax credits?