The R&D tax credit is a dollar-for-dollar tax savings that directly reduces a company’s tax liability.
There’s no limitation on the amount of expenses and credit that can be claimed each year. If the R&D credit can’t be used immediately or completely, any unused credit can be carried forward for up to 20 years. In addition, previously filed tax returns can typically be amended for up to three years in order to claim the R&D credit retrospectively, providing an avenue to recoup previously paid taxes.
New companies may be able to benefit from the payroll tax offsets designated for qualified small businesses. Companies that have gross receipts for five years or less and less than $5 million in gross receipts may be eligible to apply up to $250,000 of the R&D tax credit against their payroll taxes.
The R&D credit is available both at the federal and state level, with the majority of states offering an R&D credit to offset state tax liability.