What is the R&D Tax Credit

Michelle Boyer. Jul 21, 2021. Updated: Mar 17.

Overview

The R&D tax credit is a U.S. tax incentive for businesses that develop, design, or improve products, processes, formulas, or software.

It was introduced in 1981 to encourage innovation and technical jobs in America.

The article says the credit is calculated based on wages paid to employees performing qualifying work.

Key points

• The credit is prescribed in 26 U.S.C. § 41.
• It can be claimed by taxpaying businesses.
• It is not limited to scientists or large corporations.
• Small and mid-sized businesses in many industries may qualify.
• The article says less than 3 in 10 qualifying businesses actually claim it.

Qualifying activities

The article says qualifying research activities are broader than many business owners realize.

A company generally needs to be working to improve a product or process in the U.S.

Examples mentioned include applied sciences and other technical projects.

Related business areas mentioned

• Offsite construction building techniques
• Tax strategies and investment trends
• Risk management

Consultation

The article says the initial consultation is simple and quick.

Contact: michele@micheleboyerassociates.com

Phone: 720-892-9755

Disclaimer

The article states that the information is for educational purposes only and is not tax or legal advice.

It says the information was obtained primarily from IRS.gov and uschamber.com.