Software companies represent one of the fastest-growing sectors for the R&D tax credit. The spectrum of qualifying companies ranges from those developing and marketing software to firms creating internal use software to boost their operational efficiency.
Given that much of the activity in software development companies is labor-based, even a handful of software developers can generate significant tax credits. Contract software developers based in the United States can also tap into the benefits of the R&D tax credit. Moreover, there are eligible costs associated with renting or leasing computing resources, often referred to as cloud computing.
For startup software companies generating less than $5 million in revenue, the R&D tax credit offers an additional benefit. These companies can apply the credit against payroll tax, even if they are not yet profitable. This provision can provide a crucial cash flow boost during the initial years of the startup’s operations.
This software developer with annual sales of $2.7 million realized a combined federal and state tax credit of over $101,000.
This company develops specialized digital signage solutions requiring significant software development.
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.