R&D Tax Credits For Startups

R&D Tax Credit

small business

Deborah Roth, CPA
January 23, 2022

The R&D tax credit, also known as the Research & Development tax credit, is a federal tax credit designed for qualified businesses to offset their payroll tax - this includes startups. If you have a startup company that performs research and/or technology development activities, you can apply for up to $500,000 of research credit against income tax liability on your income tax return. ‍

R&D tax credit for startup businesses

If you're a startup owner looking to reduce your business expenses, it's worth considering the federal R&D tax credit. You can lower the payroll tax liability by up to $500,000 and invest in R&D activities. Thanks to this payroll tax credit!!

About R&D payroll tax credit?

The R&D payroll tax credit is a federal tax credit that allows businesses to offset their payroll taxes with research and development expenses. This credit is designed to encourage startup companies to invest in research and development activities that can contribute to innovation, growth, and competitiveness in their industries. Startups investing in R&D can claim up to $500,000 per year to offset their payroll taxes with the R&D payroll tax credit.

Eligibility to claim the R&D tax credit

If you are a startup owner interested in claiming the R&D tax credit, your business must meet certain qualifications. These include:

  • Be in operation for less than 5 years
  • Annual revenue below $5 million
  • Engaged in eligible research and development (R&D) activities and incur related expenses

By satisfying these criteria, your startup can potentially claim up to $500,000 in tax credits per year, which can help reduce your tax burden and free up capital for further investment in research and development. Your startup may also qualify if it paid for research-related expenses such as wages, supplies, resources and cloud-based development tools and services.

Which industries qualify for R&D Tax credit

R&D tax credit is available to a broad range of industries such as aerospace, metal fabrication, consumer products, software development, and more. The credit is not limited to these industries and is applicable to eligible research and development activities across many other fields, including financial services, food and beverage, and contract manufacturing, among others.

How can GOAT.tax assist your business

GOAT.tax was established to educate businesses on the R&D tax credit and provide assistance to qualifying businesses in claiming the credit. The company boasts a team of 50+ R&D tax professionals with a combined 350+ years of experience in streamlining the R&D tax credit process. By using GOAT.tax, businesses can maximize their R&D tax credit benefits and reduce the time and effort needed to claim the credit. Our innovative platform eliminates speculations and reduces complexities in claiming the tax credit incentive, helping businesses automate the R&D credit process.

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Common Challenges When Claiming R&D Tax Credits

Although claiming this credit can offer considerable benefits for companies engaged in R&D efforts, the process can be challenging.

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No Profits, No Problem: R&D Tax Credits Can Help Your Startup

Running a startup is all about innovation and making the most of your resources. But what if you're not yet turning a profit?

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What Happens to Unused R&D Tax Credits?

What happens if you don’t use all your credits in a single year? Don’t worry! The US tax code has you covered.

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