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 Georgia 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.
If a company doesn’t utilize the full amount of the Research and Development (R&D) Tax Credit, the unused portion can be rolled over for a maximum of 10 years. To stake a claim for this credit, businesses must include both Form IT-RD and Federal Form 6765 when submitting their Georgia income tax return for the respective tax year in which the qualified research expenses (QREs) occurred.
In Georgia, 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 Georgia’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.
Established in 1997, Georgia’s Research and Development Tax Credit (RDTC) offers a financial incentive for companies to invest in innovation within the state. Specifically, the RDTC provides an income tax credit of 10% on the year-over-year growth in qualified research expenses for businesses. This program aims to encourage ongoing research activities and technological advancements by making it financially beneficial for companies to increase their R&D expenditures.
The Georgia 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 Georgia. 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.