The Research and Development (R&D) Tax Credit is a dollar-for-dollar reduction of taxes. This is a federal tax credit, and many states have their own R&D credit as well. The federal benefit is roughly 8% of qualifying expenses. To qualify, expenses must have corresponding activities which meet a set of criteria typically known as the “4-Part Test” which is as follows:
This first part of this test is straight forward. In order for activities to be technological in nature they must rely upon “hard sciences” such as engineering, chemistry, computer science, mathematics, physics, and biology.
Next, activities must have the purpose of developing a new or improving upon an existing business component such as a product, software, process, technique, formula, or invention. Improvements are generally related to enhancing quality, improving performance and reliability, or adding functionality.
At the outset of any work on a business component, technical uncertainty needs to exist; technical in relation to the hard sciences, and uncertainty in relation to determining your company’s capability, figuring the correct methodology, or coming up with an appropriate design for the business component.
Put simply, there was a process in place whereby different alternatives were considered while trying to eliminate the technical uncertainties. Experimentation should have taken place through activities such as building models, simulations, or prototypes, trial and error, test runs, and hypothesis defining, refining, and testing.
Download the full 4-Part Test PDF
We’re looking forward to sending this valuable resource to you. Understanding it can help you advance your research and development efforts and lower your tax burden.
To receive your free PDF, please take a moment to fill out the form on the right with your information. Once you submit your information, you will be emailed a link to directly download the PDF.
We appreciate your interest in our company and hope this document will provide you with worthwhile insights to help you achieve your research and development goals.
If you have any questions or comments, please feel free to reach out to us.
We’re looking forward to sending this valuable resource to you. Understanding it can help you advance your research and development efforts and lower your tax burden.
To receive your free PDF, please take a moment to fill out the form on the right with your information. Once you submit your information, you will be emailed a link to directly download the PDF.
We appreciate your interest in our company and hope this document will provide you with worthwhile insights to help you achieve your research and development goals.
If you have any questions or comments, please feel free to reach out to us.
SKEPTICAL THAT YOU’LL QUALIFY FOR THE R&D TAX CREDIT SAVINGS?
Just give us a call and we’ll walk you through everything. No matter your industry or company size, contact us and we’ll discuss with you what this tax credit can do for you and your company. This isn’t a one-time benefit either, rather it is a permanent business credit that can be taken year after year. As such, we do our best to keep you satisfied with our consulting services–confident you’ll want to engage us for each coming year.
