The perception that contract manufacturers don’t qualify for the R&D tax credit due to their absence from final component design or because they are solely responsible for production, is often mistaken. Contract manufacturers frequently qualify for the research and development tax credit. This is due to their involvement in devising repeatable and highly complex production processes which necessitate extensive experimentation.
In addition, activities like the production of prototypes, first articles, and the validation of these components also qualify for the credit. With these types of projects, there are also opportunities to qualify raw material and component expenses allowing for businesses to offset the extensive investments they have and will be making in the future.
This company has been claiming credits for the past decade and is able to claim total combined federal and state tax credits of nearly $145,000 annually.
This contract manufacturer specializes in the design of highly innovative and customized production processes for medical instruments. Customers bring unique designs that have never been manufactured, and before they are ready to engage the company for their contract manufacturing services, require proof that the company is capable of manufacturing the product.
The R&D tax credit can help a wide variety of businesses offset and reduce their income tax liability, in addition to providing many other benefits. Our team of experienced CPAs, attorneys, engineers, and technology experts helps companies save money and create cash flow with R&D tax credits that can then help drive overall growth.