The Research and Development (R&D) tax credit offers businesses an opportunity to claim tax benefits for certain qualifying expenditures. By understanding what expenses are eligible, companies can maximize their benefits. The R&D tax credit covers various categories of expenses, including salary and wages, supply costs, computer rental or lease, and contractor costs.

Salary & Wages

Under the R&D tax credit, eligible salary and wages fall into three main categories:

  1. Direct Research: This category includes individuals directly involved in performing research activities, such as researchers, engineers, CAD associates, and project managers. These employees are at the core of the credit.
  2. Direct Supervision: Employees directly supervising those engaged in direct research activities also qualify for the credit.
  3. Direct Support: Individuals providing direct support to research efforts are considered for the credit. For example, if a researcher has an assistant responsible for note-taking and data accumulation, the assistant's time can be included. Similarly, individuals testing prototypes and first articles can be considered for direct support credits.

Supply Costs

Companies can include the cost of materials used for prototyping and testing when calculating eligible supply costs. For instance, expenses associated with prototype builds and materials utilized in evaluating new formulations, such as beauty products, can be included.

Computer Rental or Lease

With the increasing demand for complex research algorithms and testing techniques in software development, claiming expenditures for computer rentals or lease costs has become more common. This includes costs associated with dedicated cloud storage specifically utilized for research activities.

Contractors

When research activities are performed by non-employees, the expenses incurred can also be eligible for the R&D tax credit. Contractors or outside resources hired for research-related tasks can be included. For instance, if a company needs to hire a specialist with expertise in electrical engineering to aid their research, 65% of the contractor costs can be considered for the credit.

Download Our Aerospace Case Study
Thank you! For Your submission
Click here to download your asset
Oops! Something went wrong while submitting the form.
Access Our Case Study on Consumer Goods Manufacturing
Thank you! For Your submission
Click here to download your asset
Oops! Something went wrong while submitting the form.
Download Our Comprehensive Metal Fabrication Case Study

To gain deeper insights into how our strategies and innovations have yielded remarkable benefits, please share your details.

Thank you! For Your submission
Click here to download your asset
Oops! Something went wrong while submitting the form.
Access Our Case Study on R&D Tax Credit for Precast Concrete
Thank you! For Your submission
Click here to download your asset
Oops! Something went wrong while submitting the form.

Which Industries Qualify?

The R&D tax credit can be applied to a wide variety of industries, including (but not limited to):

Aerospace

Tool & Die

Metal Fabrication

Plastics & Injection Molding

Consumer Products

Manufacturing

Architecture & Engineering

Food & Beverage

Financial Services

Mortgage & Banking

Software Development

Chemical

Contract Manufacturing

Construction / MEP

Pharma

Oil & Gas

Popular

By
Deb Roth
on
August 14, 2023

Maximizing Cash Flow Through Government Tax Opportunities

Amid the ongoing challenges posed by COVID-19, numerous small and midsize businesses are grappling with maintaining cash flow, operational capabilities, and their internal research and development initiatives. While the Coronavirus Aid, Relief, and Economic Security (CARES) Act did extend financial aid to these COVID-19-affected enterprises through emergency grants, retention tax credits, and forgivable loans, these solutions offer only temporary cash flow relief, falling short of providing lasting solutions.

By
Deb Roth
on
August 14, 2023

Understanding the R&D Tax Credit Carryforward Period

The R&D Tax Credit Carryforward Period refers to the duration during which unused portions of research tax credits can be applied to offset future tax liabilities. This provision is often overlooked by many taxpayers who are eligible for R&D Tax Credits. In most cases, companies that have qualified research expenses but lack current income can carry forward these credits to offset taxes on forthcoming profits. The carryforward period allows credits to remain applicable for up to 20 years. Additionally, the option to carry back credits for the previous year is also available.

By
Deb Roth
on
August 14, 2023

Are R&D Tax Credits Convertible to Cash?

Navigating the world of R&D Tax Credits often prompts the question: Can these credits be converted into cash refunds? It's a query frequently posed by businesses seeking to maximize their returns on research and development investments. While R&D Tax Credits themselves aren't inherently refundable, they can still yield a financial windfall in the form of cash benefits.

Have any question? We're here to help.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Cookie Consent

By clicking “Accept”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. View our Privacy Policy for more information.