What is R&D credit and why should you consider it?
The research and development (R&D) tax credit is a government tax relief for companies investing in research and development to create new innovations in the US. This incentive was implemented to stimulate and transform the landscape of R&D in industries of all sizes.
It is a significant advantage for businesses that develop, design or improves products, techniques, software and similar activities. Your activities may be eligible if your company has simply invested time, money and resources toward the development and enhancement of its products and processes.
Every company must consider R&D tax credit as it has a great tax-saving incentive for those who want to increase their internal research and development activities.
R&D tax credit services provided by National Cost has been recognized and performed for companies around XXXX.
Our qualified R&D experts work with accreditation and code enforcement bodies in the US to provide companies with the consulting, testing, & inspection they require for R&D.
Benefits of R&D tax credit
The federal government is well aware that innovation is a major driving force in the American economy. Through the R&D tax credit, companies can obtain a certain percentage of net benefit for eligible annual research expenditures that surpasses a base amount.
Sadly, despite these opportunities, many companies fail to full advantage of R&D tax credit because they fail to understand or don’t have the supporting documents.
National cost’s R&D tax credit team provides unparalleled tax credit expertise to determine if your company’s research work qualifies for a tax credit. We spare you from complex jargon and translate the details to provide clarity for you. Most importantly, our tax advisors can save your valuable time so that you can focus on your day-to-day activities.
Some of the major benefits of claiming R&D tax credit are:
- A source of cash for many small and mid-sized companies
- Major reduction to current and future federal and state tax liabilities
- Tax credit may carry forward up to 20 years
- Increase cash flow for current and future years
- Apart from federal R&D tax credit, some states offer a ‘state’ R&D tax credit as well
- Helps to maintain a competitive edge in the globalized economy
Qualifications for claiming R&D tax credit
Your company may qualify for R&D tax credit including but not limited to the following activities.
- Develop a product that is new to the market
- Engineering and designing new product
- Performing research intended towards discovering new information
- Designing and evaluating product alternatives
- Introducing noteworthy changes to a product’s concept or design
- Design, construct, test prototypes and models before production
- Applying for patents
- Building new facilities or building new ones
- Testing for quality certification
- Developing computer-generated prototypes or models
- Experimenting with new materials and integrating them to develop manufactured products
- Research specifically aimed to cut down product’s time-to-market
- Developing and modifying research methods
R&D tax credit 4 part test
R&D tax credit eligibility mainly depends on whether the work you are conducting meets the criteria recognized by the IRS know as the four-part test. They are:
- Nature : The activities carried out must basically rely on principles of physical sciences, biological sciences, computer science, or engineering.
- Purpose : To qualify for the R&D credit, the purpose of the research must relate to improving your company’s process/products which would result in better quality, function, reliability or quality.
- Process : To achieve desired results, experimentation of the qualifying activities must involve simulation, logical trial and error, assessing alternatives, and refining hypotheses.
- Uncertainty : The qualifying activities must discover information to eliminate uncertainty relating to development or improvement of a production process
Industries that qualify for R&D tax credit
A popular myth prevailing around R&D tax credit is only high-tech, biotech, and pharmaceuticals qualify for it. But, in the recent years, a significant amount of clarification has been offered to shed light on the confusion prevailing around the R&D tax code.
Without realizing it, many businesses carry out activities that qualify for R&D tax credit. We have found out that many of our clients have made an effort to make stronger, economical and reliable products by creating a resourceful process. They think that they were just doing their job, when in fact they were performing activities that qualify for R&D tax credit all along.
These are some of the industries that qualify for R&D tax credit but are not limited to:
- Information technology
- Software and development
- Aerospace and Defense
- Clean Technology
- Communications and Media
- Food and Beverage
- Forest Products
- Health Care
- Life Sciences
- Manufacturing and Consumer Products
- Professional Services
- Wineries and Vineyards
National cost will provide the expertise required to navigate the complex requirements of the R&D tax credit. Our team frees up time for businesses to let them focus on what they do best-innovation. Contact us today to find out if your business qualifies for R&D tax credit.