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.
Businesses in Delaware can earn a 3% state income tax credit for the increase in their annual research and development expenses, compared to the previous two years. To calculate the credit, the eligible expenses incurred for qualifying R&D activities must be identified and calculated, including wages, supplies, and contract research. The credit must be claimed 25% each year for four years. Accurate records and documentation must be kept to determine eligible expenses.
You must complete and submit Form 2071AC by September 15th following the taxable year in which the qualified research and development expenses occurred. Choose a calculation method for the Delaware Research & Development Credit; note that only one method can be selected for credit computation.
In Delaware, R&D tax credits are available to companies that engage in qualifying activities to advance knowledge or improve processes, products, or technologies. These must be technological, aid in product development, and involve experimentation. Eligible expenses exclude land, equipment, surveys, customer-specific costs, and government-funded research. Some of the qualifying R&D activities include: Development of new products, Testing and experimentation, Development of prototype, Solving technical problems and the like. Accurate record-keeping is crucial for claiming credits.
Eligible businesses in Delaware’s enterprise zones can claim for R&D tax credit if they meet legal requirements under the state and federal law. The credit requires 3 years of presence in the same enterprise zone, with prorated credit for businesses opening mid-year. Qualifying R&D activities must advance knowledge or improve processes, products or technologies. It even includes C-corporations and pass-throughs.
In Delaware, businesses have the option to elect a Research and Development (R&D) Tax Credit for their taxable year. This credit comes in two forms: either 10% of the excess of the taxpayer’s total qualified research and development expenses in Delaware over the taxpayer’s Delaware base amount, or 50% of Delaware’s apportioned share of the taxpayer’s expenses. This flexible credit structure aims to encourage more companies to invest in research and innovation within the state.
The Delaware Research and Development Tax Credit allows for businesses to claim a percentage of their qualifying research expenses.
Wages paid to employees who are directly involved in the performance of research and development activities within the state of Delaware. This includes payments made to subcontractors involved in the performance of such activities.
Most states offer R&D tax credits as well with many of them being more lucrative than the federal credit. At Source Advisors, we can help assess your company’s federal R&D tax credit opportunity and also determine any state R&D tax credit availability. 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.