The R&D tax credit was founded in 1981 as part of the Economic Recovery Tax Act to help companies remain competitive. Research and development tax credits provide a dollar-for-dollar reduction in tax liability, allowing you to increase your bottom line. Businesses are able to hire more engineers, scientists and software developers with the tax savings they gain from this credit. Additionally, the credit allows companies to buy more supplies and materials.
Besides increasing your bottom line, R&D credits also help to drive innovation since the credit applies to companies that design, develop and improve upon products. By conducting research and claiming R&D tax credits, your business places itself ahead of the competition. The development of new products, processes and technology is an investment in your company’s future success. At the same time, your innovations cost you significantly less in expenses through the R&D tax credit program.
Qualified Research ActivitiesMost companies that manufacture products in the United States conduct qualified research activities that may be offset by R&D credits.
If your business invests time and resources in research activities, you may qualify to claim the R&D credit. Creating or improving a product, formula, process, invention, technique or software application is usually considered an eligible expense. The following activities are examples of research that qualifies your business to claim the R&D tax credit:
- Testing new materials and concepts
- Developing or applying for patents
- Adding equipment that improves a process
- Researching product and material alternatives
- Developing new manufacturing processes
- Participating in technical meetings
Consult A Tax Expert
The pursuit of research and development tax credits significantly improves your budget when you work with a tax expert who is knowledgeable in R&D tax rules. Your tax consultant will guide you when to renew the R&D credit and is experienced in submitting the proper documentation according to IRS timelines.
Receive guidance as you fund your business’ future through the R&D credit by speaking with a tax expert at CTI.
Ready to learn more about claiming research and development tax credits? Discover tips from tax experts on how to make R&D credits work for your business.
