Qualified Costs for the R&D Tax Credit

SALARY AND WAGES

Key roles that contribute to the R&D tax credit:

• Direct Research Employees: These are the individuals directly engaged in research activities, such as researchers, engineers, CAD associates, project managers, and more. They form the heart of the credit.
• Direct Research Supervisors: Those overseeing the direct research employees fall under this category. Their guidance and supervision add significant value to the credit.
• Direct Support Employees: Individuals providing direct support to research efforts are included here. For example, assistants taking notes and gathering data, as well as individuals testing prototypes and first articles, are considered part of the direct support team. Their contributions also qualify for credit.

SUPPLY COSTS

When engaged in prototyping and material testing, the expenses incurred for these materials hold immense significance. For instance, the costs associated with prototype builds fall under research costs, as do the expenses related to evaluating new formulations of beauty products, which are considered supply costs. Embracing these expenditures within the research framework ensures their rightful place in the pursuit of innovation and qualifies them for potential benefits under the R&D tax credit.

COMPUTER RENTAL OR LEASE

A growing trend among software development companies is the inclusion of computer rental or lease costs in their claims. As the need for running intricate research algorithms and testing techniques intensifies, these expenditures gain prominence. Notably, expenses related to cloud storage, specifically allocated for research activities, are becoming a prevalent aspect of such claims. Embracing these evolving expenditures highlights their crucial role in driving innovation and further solidifies their eligibility for the R&D tax credit.

CONTRACTORS

When research tasks require the expertise of non-employees, these costs can often be deemed qualified contractor expenses. It's possible to include costs for contractors or outside resources as long as they are directly linked to research activities. For example, hiring a specialist with electrical engineering expertise enables the inclusion of 65% of those expenditures for research activities attributed to outside researchers. This approach broadens the scope of eligible expenses, allowing businesses to tap into valuable external resources while still benefiting from the R&D tax credit.