For businesses in multiple industries looking to reduce Federal and State tax liability.
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R&D
Tax Credit
For businesses in multiple industries looking to reduce Federal and State tax liability.
R&D Tax Credits are federal and state incentives that reward businesses for investing in innovation. These credits reduce a company’s tax liability dollar-for-dollar for qualified research activities, such as developing new products, improving processes, or enhancing software.
Also known as the Research and Development tax credit, these credits incentivize U.S. based research and development activity. The Protecting Americans from Tax Hikes (PATH) Act in 2015 made this a permanent tax credit and extended the benefits to startup companies.
The R&D Tax Credit is designed to stimulate innovation by offsetting the costs of research-related activities. Companies can claim the credit annually by identifying and documenting qualifying expenses, including:
Startups and small businesses may be able to apply the credit toward payroll taxes, even if they are not yet profitable.
To claim the R&D tax credit, businesses must file IRS Form 6765, Credit for Increasing Research Activities, as part of their timely filed federal income tax return, including extensions. This form reports the qualified research expenses (QREs) incurred during the tax year.
If you missed claiming the credit in prior years, you may also file amended tax returns—typically going back up to three years—to retroactively claim the R&D credit.
The benefits of claiming the credit include:
Businesses across the U.S. may qualify for valuable R&D tax credits at both the federal and state level. While the federal R&D credit is available nationwide, many states also offer their own R&D incentives.
Each state’s program is unique—some mirror federal rules, others have their own qualifications, benefits, or filing requirements.
The 4-part test is a sturdy bridge connecting your R&D activities to tax credit rewards. Each part acts as a pillar, ensuring your project meets the eligibility criteria.
The Alternative Simplified Credit (ASC) method simplifies the calculation of the US R&D Tax Credit, reducing complexity and historical data analysis for qualifying businesses.
Navigating R&D tax credits can be complex. This FAQ gathers the most frequently asked questions about R&D tax credits, including eligibility requirements, qualified activities, and documentation best practices.
At Source Advisors, we can help assess your company’s federal and/or State R&D tax credit opportunity. Our team of experienced CPAs, attorneys, engineers, and technology experts helps companies save money and create cash flow that can then help drive overall growth.
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Source Advisors specializes in maximizing R&D tax credits for businesses across industries. Our experts guide you through eligibility, documentation, and filing—ensuring compliance and optimized results.
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The Research and Development (R&D) Tax Credit is a business incentive that can be used to reduce a company’s federal income tax liability. It is available to businesses that are engaged in the development of new or improved products, processes, software, techniques, or formulations. To qualify for this credit, taxpayers must have incurred expenses related to qualified research activities.
