Operating Systems & Productivity Software Publishing R&D Tax Credit
What is the Office Software R&D Tax Credit?
The R&D Tax Credit is a United States government incentive that can be enjoyed by businesses who engage in research and development (R&D) for office software. This tax credit is designed to encourage organizations to invest in creating productivity programs and tools by offsetting the cost of software publishing or improvement. It can be claimed against the costs of salaries, raw materials, and other expenses incurred during the R&D process.
To qualify for the R&D Tax Credit, office software businesses must possess an existing product or service that they seek to improve through R&D. Additionally, companies must demonstrate that they are engaged in a qualified activity like designing, developing, or testing new productivity software. This tax credit is available to both small and large businesses.
R&D Tax Credit Benefits for Productivity Software
Tax credits offer several benefits to eligible productivity software developers. Here are some of their most notable perks:
1. Reduction of tax liabilities. Tax credits can reduce the total amount of taxes owed by organizations by covering those incurred from developing productivity tools and programs.
2. Increased savings. The amount of credit awarded to a business is based on the price of the software or product they’re developing. The higher the price, the greater the credit and savings. Additionally, tax credits can offset payroll taxes, state taxes, and other fees incurred during the R&D process.
3. Deductions for company expenses. The cost of productivity software may be deducted from a company’s taxes as a business expense. This can help them save money on taxes and make it easier for them to get tax breaks in the future.
4. Increased deductions. With productivity software tax credits, businesses can increase the number of deductions they can take on their taxes. This can help them further expand their savings and ease the process of securing tax benefits later on.
OS Development R&D Tax Credits
The federal government offers several tax credits that can help companies offset the cost of developing new operating systems (OS). The most well-known of these is the R&D Tax Credit, which can be used to provide assistance and cover expenses related to market trends research, research inquiries, experimentation, and testing during the development of the OS.
By taking advantage of these tax incentives, developers can save money on their taxes and reinvest those savings into their businesses. To take advantage of these tax credits, software developers must carefully track their expenses and maintain accurate records. Moreover, potential beneficiaries should research thoroughly to determine which expenses may be qualified for credits and deductions.
Custom Software R&D Tax Credits
R&D Tax Credits are also available to companies that develop custom software or productivity tools for their own business. The credit is equal to 20% of eligible research and development expenditures incurred during the tax year.
To be eligible for the credit, the productivity software must be developed for use in the U.S. and newly made or significantly improved. The credit is not available for routine or evolutionary improvements. In addition, the software must be considered a technological innovation. That is, it must meet at least one of the following requirements:
- It is created through the application of a scientific or engineering principle.
- It advances knowledge in the field of artificial intelligence, science, or technology.
- It results in a new or improved function.
- It is used in a new or improved way.
Potential Qualifying Operating Systems
One of the most important decisions any business could make is the type of OS or productivity software to use. This can be a difficult choice, given the number of options available. There are Global operating systems, North America operating systems, the Middle East operating systems, African operating systems, and Asia Pacific operating systems, to name a few.
The most important thing to consider when choosing an OS is the type of business you own. For example, if you have a global company, you will need an OS that can be used in different countries. Alternatively, if you have a business based in North America, you will need an OS designed for use in North American countries.
How We Can Help
Boast helps inventive businesses recoup their R&D expenses from the government. Our team of engineers and accountants uses an AI-powered platform to proactively design and evaluate tax claims throughout the year. With this bespoke program, organizations can submit claims faster, accurately, and with bigger reimbursements. It also lowers the risk of tax audits.
Automated R&D for Operating Systems & Productivity Software Publishing
- Payroll
- Accounting
- Jira
- Github
The Boast platform gathers data from your technical and financial systems to identify and categorize eligible projects, time, and expenses—estimating along the way instead of only at the end—and getting you more money, faster, for less time, and risk.
- Time Tracking
- Cash
- Audit Evidence
- Tax Forms
Frequently Asked Questions
Q:Is my company eligible for the operating system tax credit?
A:
To be eligible for the operating system tax credit, the software under consideration must be a depreciable property with a useful life of at least one year. It must also be created or commissioned by the company claiming the credit and not available for purchase from a third party.
If you are not sure whether your software is eligible for the tax credit, we recommend speaking to a tax professional. They will be able to assess your specific situation and advise you on the best course of action.
Q:How do I claim the credit?
A:
To qualify for the credit, your software must be developed for use in the U.S. and meet at least one of the following criteria:
- It is innovative, utilizing a new or unique approach to solving a problem
- It is adaptive, designed to work in changing environments or with changing data
- It is capable of performing complex calculations or processes
- It is designed to operate in real-time or near real-time conditions
- It has special security features not typically found in similar products in the productivity software publishing market
Q:What expenses are eligible for the credit?
A:
Qualified research expenditures include fees paid to a market research company, compensation for computer science employees who develop the software or OS, costs of contracted services, third-party software, and increasing research activities. Materials and supplies used in the development process may also be included, but only if they are not capitalized on your financial statements.
Q:What are examples of qualified activities?
A:
Qualified R&D activities for the computer operating systems tax credit include:
- Developing new or improved software applications and services
- Designing and developing a new or improved database
- Designing and developing a new or improved user interface
- Optimizing existing codes to improve performance or reduce defects
- Automating manual processes to improve efficiency
- Developing tools or utilities to support software development
- Conducting research on the feasibility of new ideas or approaches
- Prototyping new ideas or approaches
Q:Can I claim the credit if I outsource my software development?
A:
Yes, you can still claim the credit if you contract out some or all of your software development tasks. However, you can only claim it for the wages paid to the third-party employees directly related to software development.
Q:Can I claim the credit if my software is not yet completed?
A:
Yes, you can still claim the credit even if your software is not yet completed. However, you can only claim it for expenses incurred until the software’s launch.
"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
Find Out How Much Money You Can Get From The Government
Your free 1-hour consultation includes a detailed review of our platform, your projects, processes, and financial data by one of our R&D Tax experts.
Talk to one of our experts to see how outsourcing your R&D tax claims to Boast can get you more money back from the government and help you regain the time you need to run your business.
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