What is the R&D Tax Credit?
Primarily a labor based incentive, the R&D Tax Credit applies to activities undertaken to develop new, improved and more reliable products, processes and formulas such as:
- Developing or testing new products or materials
- Developing new or enhanced formulations
- Testing new concepts
- Improving existing products
- Trial and error experimentation
- Designing tools, jigs, molds and dies
- Design and analysis of prototypes or models
- Developing, implementing or upgrading systems/software
- Developing or improving production or manufacturing processes
- Paying outside consultants/contractors to perform any of these activities
- And more…
Qualifying Industries
- Aerospace
- Agriculture
- Agriculture
- Automotive
- Chemicals
- Electronics
- Engineering
- Food Service
- Forestry
- General Manufacturing
- Hardware Development
- Pharmaceuticals
- Semiconductors
- Software Development
- Telecommunications
- And more…
Tax Benefits
The credit is generally equal to 20% of qualified costs and is a dollar for dollar match on both federal and state taxes owed. Taxpayers can carry forward the credit for up to 20 years and may amend any open prior tax years to claim refunds. In 2012, more than 15,000 companies claimed the credit with a benefit of over $8 billion.