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Research and Development

R&D Tax Credits: Qualifying Activities and Industries

Think about it—only one out of every 20 eligible businesses takes advantage of the R&D credit. That’s because many businesses don’t realize that their industry is ripe with eligible activities. While many industries have qualifying activities, an R&D tax credit survey will help you determine which activities qualify.

Activities

In general, if your company has invested money, time and resources in activities that help improve a process, product, technique or formula, or contribute to the invention of a new process or product, you stand a good chance of qualifying. Here are some common qualified research activities:

  • Developing or designing new products, processes or formulas
  • Developing a new manufacturing process
  • Developing prototypes or models
  • Developing internal software solutions
  • Developing or improving software technologies
  • Testing new materials or concepts
  • Streamlining internal processes
  • Maintaining laboratory equipment
  • Documenting research activities
  • Designing or evaluating product alternatives
  • Certification testing
  • Environmental testing

There are also certain expenses that qualify for R&D tax credits. These include wages related to performing a qualified service, supplies directly linked to qualified research activities and contract research for payments to third-party contractors that meet the same qualification requirements for wages.

There are also certain expenses that qualify for R&D tax credits. These include wages related to performing a qualified service, supplies directly linked to qualified research activities and contract research for payments to third-party contractors that meet the same qualification requirements for wages.

All activities and expenses require strict documentation. A qualified tax credit professional will provide all the specific information you will need to claim any eligible credits. Again, the R&D tax credit study will provide you with a comprehensive analysis of your company’s R&D activities, help you document your activities and defend tax credit claims in the event of an audit by federal or state taxing authorities.

Industries

The activities listed above can apply to a wide range of industries. The following list includes some of the industries that typically have eligible activities:

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Now that you have a better understanding of potentially eligible activities and the industries that conduct those activities, let’s take a look at how you can partner with a professional R&D tax credit expert who will conduct a thorough tax credit study and help you with the documentation process you will need as part of the eligibility requirements.

Curious about R&D tax credits? Download your free guide here.

For more information or to request a free assessment to determine your company’s qualifying R&D tax credit eligibility, please contact Dennis Murphy, Jr., CPA, CCA, at 440-605-7124 or dmurphy@skodaminotti.com.

R&D Tax Credits Guide

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