R&D Tax Credits in Iowa

Can I Claim R&D Tax Credits in Iowa?

Yes, you can claim R&D tax credits in Iowa. The state offers a research and development tax credit program known as the Research Activities Credit (RAC).


The Research and Development Tax Credit (R&D) is available to businesses of all sizes in the United States that engage in research and development activities. This tax credit is not limited to scientists and research labs, but extends to a diverse range of industries and businesses. The R&D tax credit was established to encourage research and development conducted in the United States. Each year, an increasing number of companies are utilizing this tax credit. Furthermore, in 2015, the PATH Act made the R&D tax credits permanent and expanded the eligibility to include startups.

What are the Potential Benefits of the R&D Tax Credit?

Qualifying companies can obtain substantial cost savings through claiming R&D tax credits. These benefits include:

  • Increasing Cash Flow
  • Federal and State Dollar-for-Dollar Income Tax Reduction
  • Claim Credits for Open Tax Years Going Back 3-4 Years
  • Reducing Your Tax Rate


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Who Can Claim the R&D Tax Credit?

The misconception that R&D tax credits are only applicable to scientific researchers or creators of groundbreaking products is false. In reality, the scope of R&D credits is extensive and reaches beyond these narrow categories.

Regardless of their size or sector, companies can be eligible for federal Research and Development (R&D) Tax Credits if they meet the government's criteria for innovative activities. However, a significant number of companies are unaware of their eligibility and are missing out on substantial federal and state R&D tax credits.

Your business's growth is being propelled by the same activities that make you eligible for the R&D tax credit.

  • Developed new products
  • Improved existing products
  • Developed software for internal or external use
  • Improved manufacturing processes

The activities that qualify for the Iowa R&D tax credit are the same ones driving growth in your business.

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How Do I Claim the R&D Tax Credit?

Companies can potentially claim 7-10% of their eligible expenses as a federal R&D tax credit. For instance, a software developer, engineer, or lab technician earning $100,000 annually could save up to $10,000 in taxes.

Expenses eligible for research activities within your company typically consist of employee compensation, materials, and contracted services. Several types of documentation can be used to validate these qualified expenses, such as payroll records, financial documents demonstrating supply or contract research expenditures, and invoices from vendors.