The Research and Development (R&D) Tax Credit was created to promote U.S. innovation and reward companies for continued investment in research and development activities by providing a dollar-for-dollar reduction in federal and state income tax liability.
Credit can be claimed on qualified research activities that demonstrate:
- Improvements or change beyond aesthetics
- Use of testing and experimentation
- Rely on the principles of science
- Lead to a new or improved product or process
Understanding and claiming incentives your
business has already earned can:
Offset Payroll Taxes
Improve Cash Flow
Expand Research Investment
Lower Overall Tax Rate
How to Identify Your Eligible Credits
Step 1: Assess
Get a Preliminary
Assessment at No Cost
CSSI will help determine what credits your business may qualify for based on IRS guidelines, as well as the potential savings they can realize for your operations.
Step 2: Review
CSSI Conducts a Comprehensive
Review of Your R&D Operations
Our analysts determine what activities meet the federal government’s test for qualified innovation activities and help you claim the credits you’ve earned.
Step 3: Report
You Receive a Full Report with All Necessary Documentation
We’ll help you make sure all credits are in compliance with program regulations and completely and consistently documented year over year.
FAQs
Find Answers to Frequently Asked Questions
About CSSI’s Products and Services
R&D tax credits are dollar-for-dollar reductions in tax liability for companies that conduct qualifying research activities. They’re designed to incentivize innovation and technological advancement.
While many industries can qualify, common ones include manufacturing, software development, engineering, aerospace, pharmaceuticals, food science, and agriculture.
Qualifying activities must meet a four-part test:
- Be technological in nature
- Involve the elimination of uncertainty
- Involve a process of experimentation
- Have a qualified purpose (to create new or improved business components)
Qualified research expenses typically include:
- Wages for employees conducting research
- Supplies used in the research process
- Contract research expenses (65% of payments to contractors)
- Rental or lease costs of computers used in research activities
You can typically claim R&D tax credits for the current tax year plus the previous three tax years.
Yes, qualifying startups can use the credit to offset up to $250,000 in payroll taxes annually for up to five years.
The credit is generally calculated as a percentage of qualified research expenses over a base amount, which is determined by your company’s historical research activities.
You should maintain contemporaneous documentation of your research activities, including project records, payroll records, general ledgers, and any other documents that support your qualified research expenses.