Since 1981, the Research and Development Tax Credit, known as the R & D Credit, has been repeatedly extended for a year or so at a time, only to lapse and be extended again. The signing of the Protecting Americans from Tax Hikes (PATH) Act on December 18, 2015 was a true game changer because this credit is now permanent and better than ever. The uncertainty about its fate is gone, which makes it easier to estimate the true costs of research and development. For small businesses, the credit can now be used against Alternative Minimum Tax. And startups, which may not owe any income tax for the first few years, can now use it as a credit towards payroll taxes.
The R & D Credit isn’t just for companies with scientists in lab coats. It’s estimated that only one out of every 20 companies eligible for this credit claims it. This credit is for any company that applies science to design, develop or improve anything they do or make. All that’s needed is investing time, money or resources to advance or improve a product or a process. A key to claiming this credit is good documentation of the process from concept through trial and error to commercial release or deployment of the new product or process. Companies as diverse as architecture firms, software developers, breweries, machine shops, construction contractors and furniture manufacturers have claimed this credit and saved on taxes. Call our office today so we can help you save with the R & D Credit.