How to Utilize R&D Tax Credits in Your Manufacturing Business

[Julio Gonzalez]

While we know that many manufacturing companies face tax concerns, there is a potential solution. Companies may be eligible for R&D tax credits while being unaware that they qualify. This can be a wonderful tool to help mitigate tax liability.

A major concern for manufacturing companies is that high profits lead to high tax bills, resulting in significant expenses to the company. On top of that, if your company operates in a state with state tax, there is also the problem of high corporate taxes. On top of that, there’s sales tax to pay - sometimes in multiple states depending on your sales. There’s also payroll taxes, social security taxes and Medicare taxes. Don’t forget about property taxes on the real estate and other assets (check out this article for real estate tax strategies).

The R&D tax credits can significantly help companies reduce their tax burden while also promoting innovation and technology which can result in the growth of your company and enhance the productivity within that sector of manufacturing. The tax credits are based on a percentage of the business’s qualifying R&D expenses which allows the manufacturers to offset the tax liability. This can increase cash flow to allow the business to pay off debt or invest in other areas of operations. Additionally, these credits are refundable, so companies can receive cash payments even if they have no tax liability. This can provide additional liquidity for purchasing new equipment, new technology or undertaking new essential projects.

Here are three examples of companies that benefited from R&D tax credits.

Florida Specialty Manufacturer

Saved nearly $100,000 in taxes. The R&D tax credit analysis uncovered over $1M in qualified R&D expenses.

Custom Manufacturer in New York

Saved more than $650,000 in taxes. The R&D tax credit analysis uncovered nearly $7M in qualified wages.

Are you utilizing R&D tax credits in your company?