There are many reasons why businesses should consider claiming the Research and Development (R&D) tax credit. However, certain things must be considered when determining whether this financial strategy could benefit your business - The first is determining your eligibility. There are three types of R&D that may align with your business; here are a few examples that highlight their nature.
Basic Research
Seeks to discover new facts or principles, often exploratory and theoretical
- Studying the properties of a new material
- Investigating the behavior of a biological process
- Exploring the fundamental laws of physics
Businesses that conduct basic research for aerospace, technology, engineering, or pharmaceutical companies may be eligible to claim the R&D tax credit because the knowledge gained from this type of research can help the future application of various research and development activities.
Applied Research
Involves devising new applications for existing knowledge
- Creating new products, processes, or technologies
- Creating new software to improve productivity
- Designing more efficient processes
IT, software development, automotive, and chemical businesses that focus on developing solutions that can be brought to market may also be eligible to claim the R&D tax credit. This research contributes to innovation and competitive advantage across various industries and claiming the R&D credit could help businesses further advance within their respective fields.
Experimental Development
Knowledge gained from research or practical experience is used to produce new materials, products, devices, and processes or to improve existing ones
- Prototyping and testing new products or processes
- Improving existing formulations
- Optimizing software for better performance
Businesses in health technology, renewable energy, agriculture, and construction that use existing knowledge to create new products, processes, or software or improve existing ones may be eligible to claim the R&D credit.
Work with GOAT.tax
Companies who want to claim the R&D Tax Credit should consider working with or seeking advice from tax professionals with a robust background in R&D. GOAT.tax reviews eligibility of business activities and integrates with various payroll platforms to gather expense details.
With over 350 collective years of experience across a national team of more than 50 R&D tax credit experts, we stay updated with and ensure our users are aware of all legislative changes. GOAT.tax prepares a fully compliant R&D study report for tax filing, including federal and state tax forms which gives our clients peace of mind in the event of an IRS audit.
R&D Tax Credit vs. R&D Tax Deduction: What's the Difference?
Businesses that invest in research and development may encounter two tax concepts that sound similar but work very differently: the R&D tax credit and the R&D tax deduction. Both relate to research and development spending, but they are not interchangeable. They operate under different sections of the tax code, affect a business's taxes differently, and have different qualification rules.
R&D Tax Credit for Manufacturing Companies: What CPAs Need to Know
Manufacturing clients are among the strongest candidates for the federal R&D tax credit, yet many never claim it. The work that qualifies often looks like everyday operations: engineers refining a product, a production team automating a line, or a quality group testing new materials to cut scrap. For CPAs, that creates an opportunity to deliver real value by recognizing qualifying activity early. This guide covers which manufacturing activities and expenses may qualify, how the Four-Part Test applies, what documentation matters, and the questions that can help uncover R&D opportunities with your clients.
Does My Business Qualify for the R&D Tax Credit? The 4-Part Test Explained
"Does my business qualify for the R&D tax credit?" — this guide breaks down the IRS 4-part test, what counts as a business component, and which expenses qualify.