R&D Tax Credit
The R&D Tax Credit is the single largest tax credit available to businesses, valued at over $11 billion a year. Companies from various industries can qualify for this government-sponsored tax benefit just by performing their day to day activities.
Examples of Qualified Activities
If your firm is involved in the following activities, an R&D tax credit may be a lucrative opportunity.
Developing new or improved products
Developing, implementing, or upgrading systems or software
Designing prototypes, models, or samples
Improving product quality and/or yields
Performing alternative material testing
Benefits of R&D Tax Credit
R&D tax credit results in an immediate benefit to a company by reducing current and future years' federal tax liability - creating a ready source of cash. The credit differs from a tax reduction by providing a dollar for dollar offset against taxes owed or paid.
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The credit was introduced in 1981 to increase technical jobs in America by encouraging businesses to invest in innovation. It is calculated based on the wages of the employees performing the qualifying work, making it the most valuable, permanent tax incentive available to American businesses.
The credit works for businesses of all sizes, not just major corporations with research labs. What constitutes R&D concerning the credit is much more expansive than business owners realize.