Tax Credits for Research & Development!
Originally published on April 6, 2015
Updated on November 14th, 2024
For over 30 years, the IRS has provided a nonrefundable tax credit for companies engaged in research and development (R&D). Currently, the credit is set to expire on December 31, 2015, but is expected to be renewed as it has been annually in the past.
What qualifies?
Salaries, wages, supplies and contract research expenses paid solely for the purpose of R&D. What defines R&D? Although the definition has been debated between the courts and IRS for years, R&D basically includes the development of a new product, process, formula or technology, among other things.
How do I get it?
The credit is calculated and reported on your company’s federal income tax return. There are numerous ways to calculate the credit using relatively complex calculations. You should consult with your tax advisor to determine if your activities qualify for the credit.
How much is it?
The amount of credit depends on the level of your R&D costs and which method you choose. However in some cases the credit can be up to 13.5 cents for every qualified dollar. Any unused credit in a tax year can be carried forward for up to 20 years.
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