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.
Many companies are unaware that their day-to-day operations could qualify for a dollar-for-dollar reduction of their income tax liability. Indeed, the R&D tax credit regularly provides a wide range of businesses with a source of extra cash—up to 10% of annual R&D costs for federal purposes and much more when state credits are factored in.
Request a complimentary benefits estimate to receive a preliminary estimate of the potential tax benefit to your organization or ask questions specific to your industry.
Stay up to date on recent changes related to R&D tax credits.
The R&D tax credit is valuable to small, midsize, and early-stage businesses. A specific benefit: The credit can be used to offset payroll tax—either instead of or in addition to income tax.
If your company attempts to create products that are lighter, faster, and less expensive or more durable, reliable, or precise, the R&D tax credit adds up to money you can reinvest in your business rather than pay out to the IRS or state governments. The R&D credit eligibility is much broader than many companies realize.
Contact us if you have a specific question about your industry and qualifying R&D tax credit activity.