RESEARCH & DEVELOPMENT TAX CREDIT

Does your business do R&D?

What is the Research & Development Tax Credit?
An R&D Tax Credit is a tax incentive sponsored by the government to reward firms for conducting research in the United States. Its goal is to incentivize innovation and keep tech jobs in the United States. It is for businesses of all sizes—not just research labs.

What activities qualify a business for the R&D tax credit?

  • Development of a new or improved product, process, formula, and software
  • Designing a new or improved product or process and software
  • Testing prototypes, computer modelling & simulation and environmental testing
  • Activities from concept through release to commercial production

How can businesses claim an R&D tax credit?
The taxpayer must evaluate and document their research activities to establish the amount of qualified research expenses paid for each qualified research activity.

Documentation includes:

  • Payroll records
  • General ledger expense detail
  • Project lists and notes
  • Other documents produced throughout the company’s regular course of business

Industries that benefit:

  • Biotech/ Pharma
  • Life Sciences
  • High Technology
  • Hospitals
  • Research Organizations
  • Universities
  • Wineries

Startups also benefit:
In 2015, PATH Act modified the R&D Tax Credit to benefit startups and mid-sized businesses.
The Act also included the R&D Tax Credit to offset employer portion of FICA Taxes up to $250k per year for startups with less than $5m gross receipts.

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