Are R&D Tax Credits Available for Small Businesses?

R&D tax credits are available for small businesses. Also known as the Research & Development tax credit, small businesses could potentially offset up to $500,000 in payroll tax liability for qualifying activities (even those companies that are not yet profitable). Expenses that can be potentially offset with this federal tax credit include employee wages, paying contractors, purchasing supplies, and many other costs. If you have a small business that performs research and/or technology development activities, you can claim an R&D tax credit. The R&D tax credit can then be applied to offset payroll tax or income tax.

Benefits of the R&D Tax Credit

Claiming the R&D tax credit enables small businesses to:

Increase cash flow and significant savings

Reduce the Federal tax rate

Receive Federal and State dollar-for-dollar income tax reduction

Ability to claim the credit for open tax years going back 3 to 4 years

What are the Qualifications for Small Businesses To Claim the R&D Tax Credit?

In order to apply for the R&D tax credit, your small business must meet the below criteria:

Have 5 years or less in revenue

Have less than $5 million in revenue in the current year

Have conducted qualifying research activities and expenditures

Additionally, if your small business paid for any of the below, it might also qualify for the tax credit:

Employees or sub-consultants performing research

Raw materials

Consumable supplies during development

Cloud computing services related to development operations

Claiming R&D Tax Credits for Small Businesses

The following are examples of qualified research activities for small businesses to claim under the R&D tax credit:

Design and development of new or improved software applications

Development of conceptual designs and defining requirements and specifications for new or improved products

Development of tooling, fixtures, and dies

Building and testing prototypes

Development of production processes and equipment

Evaluation and testing of new materials for product development

If you have a small business that performs research and/or technology development activities, you can claim an R&D tax credit.

How GOAT.tax Can Help

GOAT.tax was created for the purpose of educating businesses on the R&D tax credit and assisting companies that qualify for the credit to claim it. Through the 305+ years of collective automating R&D tax credit software experience across our nationwide team of over 50 R&D tax professionals, we have been able to take all the guesswork out of this complex tax credit incentive. The experts at GOAT.tax can help your business with automating R&D credit through our innovative platform.

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