Each year the U.S. government gives billions of dollars in R&D tax credits, yet many companies are leaving this money on the table. Let us help!
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What is the R&D Tax Credit
The Research and Development (R&D) tax credit is a government incentive designed to reward U.S. companies for investing in innovation. They are a valuable source of cash for businesses to invest in accelerating their R&D, hiring new staff and ultimately growing.
The R&D tax credit is for businesses of all sizes. Companies from various industries can qualify for this government-sponsored tax benefit just by performing their day-to-day activities.
How does the R&D Tax Credit Work?
Companies that spend money developing new products, processes, or services, or enhancing existing ones, are eligible for R&D tax relief. If you're spending money on your innovation, you can make an R&D tax credit claim to receive either a cash payment or a corporate tax reduction. The scope for identifying R&D is huge – in fact, it exists in every single sector. And if you're making a claim for the first time, you can typically claim R&D tax relief for your last two completed accounting periods.
What Qualifies as R&D?
Many businesses are still unaware that R&D credit eligibility extends beyond product development to include activities and even operations such as the latest manufacturing methods, software development, and quality improvements. Even start-ups may be able to utilize the R&D tax credit against their payroll tax for up to 5 years. The Section 41 four-part test defines activities that qualify for the R&D tax credit: