The 2015 PATH Act impacted many temporary credits which are routinely extended for one-to-two year periods, including the Research and Development (R&D) Tax Credit, which was not only extended but also made permanent.
Any company that invests in product or process improvement can qualify. Further, these improvements need not be substantial as even evolutionary improvements may qualify. If your company is working on any of the items below, it is likely that you will qualify for the tax credit.
-New or improved products -New materials -Prototypes and models -New or improved software applications -New technological concepts -New or improved manufacturing processes and/or experimentation
Don’t Leave Money on the Table
Less than one-third of eligible companies are aware that they qualify for the Research & Development (R&D) Tax Credit. Even if companies claim an R&D credit, they frequently do not claim the entire credit to which they are entitled. This is either because they are uncertain of what qualifies for the credit or do not have the processes in place to properly document the credit.
How Much is the Credit?
The credit differs from a deduction in that it is an actual dollar-for-dollar offset against taxes owed or paid. While the computation of the credit can be complex, most companies receive a credit equal to 9-14% of total qualifying expenditures. Most qualifying expenses result from the wages paid to employees that participate in qualifying activities. If your company has been engaged in qualifying activities for the last several years, you may be eligible to retroactively claim R&D tax credits.
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