What is the R&D Tax Credit?
Rewarding Research and Experimentation
The Credit for Increasing Research Activities (“The R&D Tax Credit”) is a general business tax credit that can be used to offset corporate tax liabilities.
Is Your Business Eligible?
R&D tax credits can amount to as much as 20% of the costs incurred in developing or improving products, fabrication processes and software, yet fewer than 5% of America’s manufacturers and technology companies with revenue less than $100M claim the R&D credit.
Qualifying research and development, as it relates to the R&D tax credit, pertains to the development or improvement of products, fabrication processes and software.
The federal R&D tax credit is a computed proportion of the Qualifying Research Expenses (QREs). The proportion or amount of the credit depends on several factors and is calculated using either the Regular Credit (RC) method or the Alternative Simplified Credit (ASC) method.
Additionally, the credit can now be used to offset payroll and alternative minimum tax (AMT) liabilities. This credit can benefit small or young companies that don’t have an income tax liability or is too small to absorb the entire credit.
Because R&D Tax Credit is a specialty area within the tax code that is very complex, many companies have never taken advantage of this lucrative tax credit, even though they qualify.
