Four Questions to Ask
1. Does your work involve a new or improved product, process, software, formula, technique or innovation?
2. Is your work technological in nature, as in the process of experimentation, or does it rely on physical or biological science, engineering or computer science?
Exploring the R & D Tax Credit
So what is the R & D tax credit, and might your business qualify?
Introduced in 1981 to incentivize innovation and promote economic growth, the credit generally applies to expenses incurred during qualified research, such as in developing a new product or process or improving an existing product or process. The research must include a process of experimentation to improve function, performance, reliability or quality, or significantly reduce costs.
Over the years, the credit has undergone adjustments that give it a broader application to more businesses, but many still make the assumption that their activities aren’ t technical enough in nature to warrant consideration for the credit.
3. Was there technical uncertainty encountered for a given product design or process development?
4. Does the work call for a process of experimentation to resolve a technical uncertainty?
What’ s Your Potential for Tax Savings?
Whether you’ re unsure of your R & D tax credit potential or need help maximizing these changes for your existing R & D efforts, our tax pros stand ready to help you make the most of the tax credit and new expensing opportunities available to you
Before counting your business out, consider some examples that may qualify as R & D activity, and four questions to ask yourself.
R & D Examples to Consider
• A business designs a database to improve its storage and retrieval of information.
• A manufacturer automates a production line to increase efficiency.
About the Author
DERIK RYNEARSON
PRINCIPAL, DOEREN MAYHEW ADVISORS, LLC drynearson @ doeren. com
Derik applies his deep industry knowledge to help ensure his clients are taking advantage of the various tax credits and incentives available to them, including research and development credits, IC-DISC consulting and compliance, and more.
• A brewery creates a new distilling process or improves packaging methods.
• A construction company designs and tests more sustainable materials options.
The product or process doesn’ t have to be a new invention; rather, it must be new to your business( something you’ ve never done before).
VIEWPOINTS: ISSUE 2 2025 | 15