The Research and Development (R&D) Tax Credit is one of the best opportunities for businesses to substantially reduce their tax liability. It also remains one that’s widely unclaimed.

What is the R&D Tax Credit

The credit was established in 1981 as a way to stimulate economic growth by increasing technical jobs and encouraging businesses to invest in innovation. Because it was an income tax credit, it made it difficult for startups that weren’t profitable to benefit from it. Then in 2015, Congress made key changes that allowed businesses to receive benefits for research regardless of profitability. Today, startups can apply the R&D tax credit against the employer portion of FICA payroll taxes up to $250,000 per year for up to five years. 

Who is eligible to claim the R&D Tax Credit?

  • Businesses that have gross receipts of $5 million or less in a tax year. 
  • Businesses that have gross receipts for five years or less. 
  • Businesses not deemed tax-exempt under section 501.
  • Businesses in specific industries, including software development, hardware development, information and communications technology, agriculture, biotechnology, and manufacturing. 

The concept behind the R&D tax credit is a simple one – the government wants to reward you for your innovative research. But a number of factors go into claiming the credit. For example, applicants must evaluate and document their research activities to establish the amount of qualified research expenses.

Miami CFO has the executive-level financial team to get it done right. Does your company qualify for the R&D Tax Credit? Use this link to schedule a meeting and start the process: