{"id":231,"date":"2020-01-20T00:47:48","date_gmt":"2020-01-20T00:47:48","guid":{"rendered":"https:\/\/www.thinkastute.com\/blog\/?p=231"},"modified":"2023-11-27T00:50:11","modified_gmt":"2023-11-27T00:50:11","slug":"everything-you-need-to-know-about-rd-tax-credits","status":"publish","type":"post","link":"https:\/\/www.thinkastute.com\/blog\/everything-you-need-to-know-about-rd-tax-credits\/","title":{"rendered":"Everything You Need To Know About R&D Tax Credits"},"content":{"rendered":"

Did you know you could earn up to 13.5 cents of Research & Development (R&D) tax credit for every qualified dollar?<\/em><\/p>\n

If you answered no, you\u2019re not alone. Most companies have either never heard of R&D tax credits, or if they are aware of it, they haven’t filed any claim so far because they assume it is only meant for large corporations or research labs. In reality, thanks to the Protecting Americans from Tax Hikes Act (the PATH Act) of 2015, small companies and start-ups can also reap this tax advantage in their annual tax returns.<\/p>\n

We\u2019ve put together a handy guide for you to understand the in\u2019s and out\u2019s of R&D tax credits fully. Let\u2019s take a closer look at what they are and how can they help you save taxes!<\/p>\n

What Are Research & Development (R&D) Tax Credits?
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R&D tax credit is a benefit that businesses can receive if they invest in designing or developing services, processes, software or products in science or technology. In essence, R&D tax credit is the government’s way of rewarding businesses for investing in innovation.<\/p>\n

Has The R&D Tax Scheme Evolved Over The Years?<\/strong><\/h6>\n

R&D tax is an initiative that began as a temporary scheme back in 1981. However, in 2015, the PATH Act made the R&D tax credit scheme permanent. Additionally, it included modifications that were appealing to SMEs and also opened up the scheme to start-ups. Congress has eliminated the Alternative Minimum Tax (AMT) bar – this enables businesses to enjoy the R&D tax scheme even more. The hope is that the American economy will become stronger as more businesses invest in increased innovation.<\/p>\n

Who Is Eligible To Claim R&D Tax Credits?
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As long as your business is investing in research and development activities that help innovation in science or technology, it doesn’t matter what industry sector you belong to – software, biotech\/pharma, manufacturing, engineering, food, life sciences, construction, architecture, hospitals, food processing, research organizations, universities, financial services, wineries, warehouse services – the spectrum is quite wide! Even SMEs that sub-contract R&D work are often entitled to claim R&D tax credits.<\/p>\n

Why Do Many Businesses Fail To Claim R&D Tax Credits?<\/strong><\/h6>\n

Many businesses, especially small, fail to understand the importance of R&D tax credits and do not claim its benefits because:<\/em><\/p>\n