5 Reasons To Claim Tax Credits For Research And Development Expenses

Written by Taz Singh, CPA. Updated Jul 29, 2015.

ThinkstockPhotos-505620793Research and development tax credits help many companies grow and improve their businesses. This valuable tax solution reimburses you for time and money you spend in developing new and improved products and services. As such, you receive valuable tax savings while your customers’ needs are met.

Businesses that implement an R&D strategy are usually more successful than businesses that do not invest in research and development. An R&D strategy gives you an advantage over competitors while boosting productivity and making room for innovation. Learn more about research and development and why you should claim R&D credits.

1. You May Already Be Conducting R&D Studies

Many businesses are already working towards making their products stronger, less expensive, more reliable or more versatile. Additionally, businesses frequently seek to improve their processes so they become more efficient.

If you view these improvements as simply part of your business strategy, it’s time to look closer at research and development tax credits. You may already be performing activities that qualify you for these credits.

2. You Receive Savings On Expenses You’re Already Paying For

If you are already performing R&D activities, it is wise to pursue reimbursements for your current expenses. The R&D tax credit is not a deduction, so you receive a dollar-for-dollar credit against taxes you owe or have paid. You are also able to submit for R&D costs in the year expenses were incurred, meaning your wait time is minimal.

3. An Investment In Research Drives Your Business Forward

Businesses gain an advantage over their competitors when they are more efficient or have products that are not easily replicated. For example, R&D efforts may lead to improved business processes that cut marginal costs or increase marginal productivity. Competitors that have not invested in research and development often fall behind.

4. Innovation Leads To New Products And Services

When you are continually testing products and processes, improving upon existing models and developing new ideas, the end result is often a better product or service.  Some of the most common industries that conduct research in order to produce new products and services are as follows:

  • Industrial machinery

  • Trucks and tractors

  • Computing technology

  • Manufacturing

5. R&D Tax Credits Make Mergers And Acquisitions More Attractive

Research and development tax credits may be claimed one year and taken in another year, which means they may be transferred to new ownership. Additionally, many companies claim R&D benefits because the credits legitimize their technology. Businesses that claim R&D credits are thus more attractive to larger corporations seeking an acquisition

If your business already conducts R&D activities or is working to develop a research and development strategy to drive your company forward, you should not miss out on tax savings you are entitled to claim.

It is often helpful to speak with a tax expert who is available to answer your questions on whether your company qualifies for R&D credits, how to claim credits or when to submit for credits. Partnering with an outsourced tax consultant is the best way to maximize tax savings when you pursue R&D credits and other tax solutions.

Ready to learn more about how to profit from research and development tax credits? Discover tips from tax experts on why R&D credits benefit your business.

What Can R&D Do For You?  Discover a practical approach to maximizing your federal research and  development tax credit. Download Guide

Topics: R&D Tax Credit

Taz Singh, CPA

Written by Taz Singh, CPA

Taz has 20 years of experience in tax and business incentives. Prior to establishing CTI, Taz served as a corporate tax auditor for the California Franchise Tax Board. During his tenure, Taz specialized in auditing tax credits, including manufacturers’ investment credits, research & development credits and credit limitations (IRC 382 Limitation) due to ownership changes.