By Deb Roth on July 06, 2023

Which Businesses Can Benefit From the R&D Tax Credit?

The R&D tax credit can benefit a wide variety of businesses from many industries, including startups, manufacturing firms, technology companies, financial companies, software development businesses, and many more. The R&D tax credit enables businesses to increase cash flow and savings, reduce the Federal income tax rate, and receive Federal and State dollar-for-dollar income tax reductions.


Businesses That Can Benefit From the R&D Tax Credit

Many businesses can potentially offset up to $500,000 in payroll tax liability for qualifying activities.

Startups

Startup businesses are able to claim and benefit from the R&D tax credit. As long as a business has 5 years or less in revenue, has $5 million or less in revenue in the current year, and conducts qualifying research activities, it is eligible for the credit.

The R&D tax credit can benefit a wide variety of businesses from many industries

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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



Businesses with Revenues Less Than $5 Million

As mentioned above, the R&D tax credit can potentially benefit businesses with less than $5 million in the current year who are able to claim the credit.

Does the Business Need to Conduct Scientific Research to Benefit From the Tax Credit?

No, a business is not required to conduct scientific research to benefit from the R&D tax credit. Many activities can qualify, such as automating or improving internal manufacturing processes, integrating APIs or similar technologies, developing financial pricing models, designing tools or fixtures, and creating data centers, among many others.

A Wide Variety of Industries Can Benefit

The tax credit can be applied to the following industries:

Aerospace
Tool & die
Metal fabrication
Plastics/injection molding
Consumer products
Manufacturing
Architecture & Engineering
Food & Beverage
Financial Services
Mortgage & Banking
Software development
Chemical
Contract manufacturing
And many others...

What are the Qualifications To Benefit From and Claim the R&D Tax Credit?

In order to apply for the R&D tax credit, the 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

Qualifying Activities

Businesses that perform the below qualifying activities might also benefit from the R&D tax credit:

Creating improved products, processes, formulas, software, and techniques
Automating or improving internal manufacturing processes
Designing tools, jigs, fixtures, and molds
Integrating new equipment
Development of data centers, big data, and data mining tools
Integration of APIs and other technologies
Development of financial or pricing models
Hiring outside consultants to perform any of the listed activities
Manufacturing new or improved products
Developing prototypes, first articles, models
Evaluation of alternative materials
Development of firmware
Network hardware and software development and optimization
Developing simulators
Development of risk management systems
Paying for employees or sub-consultants performing research
Purchasing raw materials
Utilizing consumable supplies during development
Using cloud computing services related to development operations


How We Can Help

GOAT.tax is powered by Source Advisors, a leading tax consulting firm providing R&D tax credits for almost 4 decades. Founded on the basic principle that the R&D tax credit should be available to companies of all sizes without fees burdening the benefit, the GOAT.tax automated software platform is backed by 305+ years of collective R&D tax credit experience. This is what sets us apart from any other platform. Our people and our experience.

Now is a good time to reexamine prior, current, and future R&D activities in order to take advantage of the R&D tax credit, regardless of industry. If you think your company might be performing work that qualifies, don’t let the potential tax savings go unclaimed. Source Advisors can help you uncover vital tax savings to reinvest in your business and fuel your next big project.

Get your free R&D Tax Credit Estimate with GOAT TAX

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