R&D Tax Credit

What is Research & Development Tax Credit?

The Research and Development (R&D) Tax Credit is a government-sponsored tax incentive that rewards companies for conducting R&D in the United States. The credit was implemented to incentivize innovation throughout the economy and to keep technical jobs here in the U.S.

What constitutes R&D regarding the credit is much more expansive than realized, with activities related to applied sciences and other technical projects qualifying companies from numerous industries.

The R&D Tax Credit is for businesses of all sizes, not just major corporations with research labs – and many companies are eligible, with an expansive list of activities qualifying for the credit.

The US Tax Credit is considered generous as each state can also offer its proper R&D Tax Credit, which is normally combined with the federal one.

U.S. Companies can benefit from an incremental R&D tax credit, made up of two different incentives known as the Traditional R&D Tax Credit and the Alternative Simplified Credit.

Eligible activities?

If your company does any of the following, your business likely qualifies for the R&D Tax Credit:

• A new or improved business process or product development.
• Technological activity.
• Process of experimentation.
• Uncertainty of an outcome.

Eligible expenditure?

• Wages paid to employees for qualified services.
• Supplies used and consumed in the R&D process.
• Contractor research expenses paid to a US-based third-party outsourcer (65% of the cost is allowed).
• Software development/ Internal use software / Cloud-based computing expenses.