New Mexico

R&D Tax Credits

New Mexico

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.

The revolutionary R&D Small Business Tax Credit offers businesses an unprecedented opportunity to reduce their tax liability and spur growth. With a credit equal to 5% of qualified research expenses (or 10% in rural areas), it goes beyond traditional incentives. It additionally includes gross receipts levies and 50% of withholding duties for staff and proprietors holding no more than a 5% stake.

Remarkably, this credit can offset 50% of the tax liability for the year, empowering small businesses to invest in innovation and expansion, ultimately driving economic prosperity.

Qualified Expenditures for New Mexico R&D tax credit encompass a wide range of essential expenses directly associated with qualified research conducted at a qualified facility. This expansive category includes various components such as employee wages, depletable land and lease payments for land enhancements, permissible operational and upkeep expenses, machinery, software and maintenance, expert services offered by consultants and contractors based in New Mexico etc. This unique and comprehensive list of expenditures highlights the diverse nature of activities and resources involved in driving innovation and research, contributing to a fresh and dynamic approach to advancing knowledge and development.

To initiate the process of claiming the credit, taxpayers are required to submit Form RPD-41385, an exclusive form tailored specifically for this purpose. Remarkably, the credit can be claimed within a one-year timeframe following the conclusion of the reporting period. It’s important to note that availing oneself of the credit for a particular reporting period renders the taxpayer ineligible to claim either the investment credit or the technology jobs tax credit for the same reporting period.

R&D Tax Credits in New Mexico

New Mexico is a trailblazer in empowering corporations and individuals through an innovative range of business-related tax credits. These unique credits, established within the state’s statutes, provide an exceptional opportunity for eligible entities to optimize their tax liabilities. Aligned with the Combined Report System (CRS) gross receipts, compensating and withholding taxes, as well as annual corporate and personal income taxes, these credits exemplify a progressive approach to driving economic growth.

What Goes into the New Mexico R&D Tax Credit as a Qualified Research Expense?

The New Mexico research and development tax credit allows for businesses to claim a percentage of their qualifying research expenses.

In order for an expense to qualify it must meet specific research criteria:

  1. Products, services, processes, or software must be new or improved in some way 
  2. Uncertainty must be eliminated as a result of the research 
  3. The research must be technological 
  4. Research must include experimentation processes of some nature

The types of expenses that are applicable to claim under the credit include the following:

Wages paid to employees who are directly involved in the performance of research and development activities within the state of New Mexico. This includes payments made to subcontractors involved in the performance of such activities.

Take Advantage of the
R&D Tax Credit with Source Advisors

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.