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R&D Tax Credit Advisor and Specialists

What is a Research and Development Tax Credit?

A Research and Development (R&D) tax credit is a tax break that allows businesses to deduct some of the money they spend on research and development from their taxable income. The R&D tax credit was created as a way to encourage businesses to invest in basic or applied research which is defined as work that is aimed at improving or developing a product or process.

The credit can be used to offset a significant portion of the costs associated with R&D, and it is available to businesses of all sizes, but the size of the credit depends on the company’s tax bracket. The deduction can be taken regardless of whether the R&D is conducted in-house or by outside contractors.

Companies can rely on it as a long-term planning tool. Businesses can elect to take the R&D tax credit as a current-year deduction or as a credit against their federal income taxes. The credit can also be carried back three years or carried forward twenty years.

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Benefits of Having an R&D Tax Credit

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There are several benefits of an R&D tax credit, including:

  1. Increased competitiveness: by reducing the amount of taxable income a company has, an R&D tax credit can make the company more competitive in the global marketplace.
  2. Increased investment: an R&D tax credit can make it more financially attractive for companies to invest in research and development, which can lead to increased innovation and economic growth.
  3. Encourages risk-taking: an R&D tax credit encourages companies to take risks with their R&D efforts, which can lead to new products and services.
  4. Enhanced innovation: the credit can help your business foster a culture of innovation and creativity, which can lead to long-term benefits for your company.
  5. Increased cash flow: the credit can help your business free up cash flow to invest in new products and technologies.
  6. Simplified accounting: the credit can help simplify your company’s accounting process by providing a tax break for money spent on qualified research and development activities.

Advantages of Having an R&D Tax Credit Advisor

Claiming an R&D tax credit can be complicated, so it is important to work with an R&D tax credit advisor or tax consultant. There are a few important reasons to work with them:

  1. They can help you determine if your business is eligible for the credit.
  2. They can help you calculate the credit amount and claim it on your tax return.
  3. They can help you keep track of qualifying research expenses throughout the year, so you don’t miss out on any potential tax savings.

Another advantage is, businesses can outsource their R&D projects to qualified contractors and still get the tax credit. This can be helpful if a business does not have the resources or staff to conduct their own R&D.

These advisors have expertise in identifying which credits are available to businesses and helping them claim these credits. They also have tools that can help businesses track their R&D spending so they can qualify for these credits.

R&D Tax Credits by Industry

There are a few different types of R&D tax credits. The most common type is the credit for basic research, which is available to businesses in all industries.

There are also industry-specific tax credits available for certain types of businesses, such as the credit for advanced technology companies or the credit for biotechnology companies.

Businesses can qualify for an R&D tax credit if they meet certain qualifications. These qualifications vary depending on the type of tax credit that is being claimed.

There are a few things that your business needs to do in order to qualify for the R&D tax credit. To start with, you need to be conducting active R&D in one of the following areas:

  • Manufacturing process improvements
  • Product modifications or improvements
  • New product or service development
  • Computer software enhancements or new applications
  • Process or product quality improvements
  • Drug, vaccine, or medical device development

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In addition to conducting active R&D, your business also needs to have spent at least $2 million on R&D activities in the last three years. And finally, your business must have a taxable income of at least $5 million. If your business meets all of these requirements, you can claim a research and development tax credit of up to 20% of the amount that you spend on R&D activities.

A team of experts with the experience necessary to prepare and defend your next R&D tax claim.

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We take the pressure off of you by authoring your technical reports, reviewing claims and eligibility, and ensuring everything possible is done to maximize your claim. With decades of combined experience, our technical and service experts make your process easy and your claim more accurate.

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Getting the most from your innovation investments means regularly monitoring qualifying work—not just once a year in a mad rush at deadline time. Boast makes it easy to stay updated with our automated software and integrations, but our experts will check in with you regularly to discuss options.

Frequently Asked Questions

A:
Businesses can qualify for an R&D tax credit if they meet certain qualifications. These qualifications vary depending on the type of tax credit that is being claimed. Generally, businesses must spend money on qualified R&D activities in order to claim the tax credit. To qualify for the credit, businesses must have incurred costs related to qualified research activities. These activities can include:
  • Developing new or improved products, processes, or services
  • Testing prototypes or models
  • Developing software
  • Engineering
  • Commercializing new technologies
A business may be eligible for the credit. However, it's important to note that not all businesses will qualify. For example, businesses that are engaged in purely creative activities with no element of experimentation will not qualify.
A:
The amount that you can claim with the R&D tax credit depends on your business' income and how much it spends on R&D activities. Generally, businesses can claim a tax credit of up to 20% of the amount they spend on R&D.
A:
The most common type is the credit for increasing research activities, which is available to companies that increase their R&D spending by at least 20% compared to the previous year. Other types of credits include the credit for new products or processes, the credit for jobs created through R&D, and the credit for small businesses.
A:
The amount of savings you can achieve with the R&D Tax Credit depends on your company's eligible research expenses for the year in question. In general, businesses can claim a tax credit worth up to 20% of their research expenses. However, there are certain caps and limitations that apply, so be sure to speak with a tax professional to find out exactly how much you could save.
A:
Eligible expenses include wages paid to employees engaged in research and experimentation activities, as well as costs for supplies, contract research, and testing.
"R&D helps us accelerate our innovation. When you’re an early-stage company building in a new market, speed is critical. We’re very grateful for the R&D incentive program and the dedicated support and guidance from Boast."
CHRISTIAN KARRER, PLANTIGA VP FINANCE AND STRATEGY

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