Research and Development (R&D) Tax Credit
The R&D Tax Credit, is a federal incentive enabling companies to save cash on a dollar-for-dollar basis for engaging in activities that pertain to the development, design, or improvement of products, processes, formulas, or software.
Contact us today to identify qualifying R&D activities within your organization!
What is the Research and Development (R&D) Tax Credit?
The R&D Tax Credit (26 U.S. Code §41), also recognized as the Research and Experimentation (R&E) tax credit, is a federal incentive enabling companies to save cash on a dollar-for-dollar basis for engaging in activities that pertain to the development, design, or improvement of products, processes, formulas, or software. This credit is a crucial financial boost, empowering businesses to hire more staff, intensify their R&D efforts, expand their facilities, and pursue various growth opportunities. Its introduction in 1981 was a strategic move to drive innovation and foster investment in development within the United States. Over time, numerous states have followed suit by implementing their own R&D Tax Credit legislation, ensuring a broad spectrum of industries can avail this beneficial incentive.
Some of the common industries that qualify include, but are not limited to:
- Aerospace
- Agriculture
- Architecture & Engineering
- Automobile
- Brewery
- Cannabis
- Chemical & Formula
- Fabrication
- Food & Beverage
- Foundry
- Life Science
- Machining
- Manufacturing
- Software Development
- Tool & Die Casting
- Winery & Vineyard
What are the Potential Benefits of the R&D Tax Credit?
There are several benefits to realizing the R&D tax credit. These benefits can include the following:
- Receive up to 12-16 cents of federal and state R&D tax credits for every qualified dollar
- Create a dollar-for-dollar reduction in your federal and state income tax liability
- Increase earnings-per-share
- Reduce your effective tax rate
- Improve cash flow
- Carry forward the credit up to 20 years
- Perform look back studies to recognize unclaimed credits for open tax years (generally 3 or 4 years)
- Utilize the federal R&D tax credit against payroll tax (applicable to certain startup companies)
How Can Propel Consuting Group Help?
- Identification: Our team of experts will work closely with you to identify qualifying R&D activities within your organization.
- Documentation: We’ll guide you through the documentation required to substantiate your R&D claim.
- Filing Assistance: We’ll help you incorporate the R&D credits into your tax filings, ensuring full compliance with IRS regulations.
- Audit Support: Should you be selected for an audit, our experts will stand by your side, offering guidance and support throughout the process