Many industries invest in research and development to drive innovation and maintain a competitive edge within their respective markets. By investing in this credit, businesses can increase their cash flow and reduce their tax rate, thus opening opportunities to further invest in advancements within their industry. Some of the common industries include and are not limited to:
Aerospace
Architecture & Engineering
Blockchain Development
Chemical
Construction/MEP
Consumer Products
Contract Manufacturing
Financial Services
Food & Beverage
Game Development
Manufacturing
Metal Fabrication
Mortgage & Banking
Oil & Gas
Pharma
Plastics/Injection Molding
Software Development
Tool & Die
The Impact of R&D
The R&D Tax Credit has played a crucial role in technological advancements and economic growth within the U.S. By offsetting the substantial costs associated with developing new products and processes, this credit empowers companies of all sizes—including startups—to embark on projects that otherwise would have been too costly.
The Research and Development Tax Credit
The Research and Development (R&D) tax credit is a federal tax incentive designed to encourage U.S.-based research and development activity. The benefit provides dollar for dollar cash savings for activities related to the design and development of new or improved activities which include products, processes, techniques, formulas, or software. The Protecting Americans from Tax Hikes (PATH) Act of 2015 made this credit permanent and extended its benefits to startup companies. By leveraging this credit, businesses of all sizes can lower their federal income tax for qualified research expenses.
The credit focuses on gathering knowledge and exploring new ideas. Research must be undertaken for discovering information that is technological in nature, and its application must be intended for use in developing a new or improved business component. Substantially all of the activities of the research must be elements of a process of experimentation relating to a new or improved function, performance, reliability or quality.
Businesses in various industries may have processes that aim to identify technologically innovative advancements, making them eligible to claim their research activities while using the knowledge gained during the research process to develop new or improved products or methods that can be used within a business’s respective industry.
Contact Deb Roth And Source Advisors Team.
