
What is the R&D Tax Credit?
Internal Revenue Code Section 41 is a federal tax incentive that allows businesses to receive a credit for eligible expenses related to Research and Development (R&D) activities conducted in the United States.
Established in 1981 and made permanent in 2015, the R&D tax credit encourages companies to invest in innovation by offsetting costs associated with developing new or improved products, processes, software, techniques, formulas or inventions.
Who Qualifies?
Businesses of any size or sector can claim the R&D tax credit, provided they meet these criteria:
- Your business must engage in qualified research activities as defined by the IRS
- Your business must have incurred eligible research expenses in the current or previous tax years
- Your business must be located in the United States
Qualified Research Activities
Common Eligible Industries
What Expenses Qualify?
The key expenses that can qualify for the R&D tax credit include:
- Wages for employees directly working on R&D activities
- Supplies and materials used for R&D purposes
- Contractor/vendor costs for qualified R&D work
- Cloud computing costs for R&D
How is the Credit Calculated?
The R&D tax credit is calculated as a percentage of eligible qualified research expenses (QREs). The rates are:
- 20% credit for businesses with less than $50 million in gross receipts
- 14% credit for businesses with over $50 million in gross receipts
The credit can be claimed annually and applied against a company’s payroll tax or income tax liability. Certain startup businesses may also be able to use the credit against their payroll taxes.
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Boast provides an innovative software solution to automate and maximize your R&D tax credit claim, while providing expert tax professionals to guide you.
With Boast’s technology and expertise, you get larger, more accurate claims with less time and effort from your team. You can truly accelerate your innovation funding with Boast.
