Many companies don’t understand the federal R&D tax credit and whether they can file for it. Understanding which processes qualify can help you reduce your tax liability and save significant money. The following will explain what business activities qualify for the R&D credit on your federal taxes.
Technical Uncertainty
Technology is constantly changing. Companies develop improvements for existing products and software to increase performance and efficiency. If your company participates in activities that better technology and eliminate technical uncertainties, you can file for the federal R&D tax credit.
Experimentation
Part of clearing technical uncertainties is experimentation to discover what works well and what doesn’t. This experimentation involves evaluating alternative solutions through simulation, modeling, trial and error, and more. The goal is to discover better ways of completing existing processes.
Hard Science
In most cases, the federal R&D tax credit is only available for experimentation utilizing hard science, including engineering, biology, chemistry, physics, and computer science. A tax professional can tell you whether your work qualifies.
A Qualified Process
Finally, you must complete a qualified process to qualify for the federal R&D tax credit. Your business activities must develop or improve software, products, or processes by improving functionality, reliability, performance, or quality.
If you qualify for the federal R&D tax credit, visit the Business Name website to learn more about how to file for it.
