Research & Development Tax Credits
A dollar-for-dollar reduction in tax owed — not a deduction — for work most companies already consider part of the job.
A credit, not a deduction
A deduction lowers the income you’re taxed on. A credit lowers the tax itself. That difference is why the research credit is worth pursuing carefully: every qualified dollar carries far more weight than the same dollar of deduction.
The credit is available across industries to companies performing activities related to the development, design, or improvement of products, processes, formulas, techniques, or software. It rewards the attempt — technical work undertaken to resolve genuine uncertainty counts even when the result doesn’t pan out.
What it demands in return is documentation: a defensible link between the people, the projects, the expenses, and the technical uncertainty being resolved. That is the study.
What counts as a qualified research expense
Wages paid to employees performing, directly supervising, or directly supporting qualified research
Supplies consumed in the research process
Computer and cloud costs for computers used in qualified research
Contract research performed on your behalf, subject to statutory limits on the portion that counts
The 80% rule
Where an employee spends at least 80% of their time on qualified research, all of that employee’s qualifying wages for the year can be treated as a qualified research expense — a meaningful simplification for technical staff.
Four questions decide whether an activity qualifies
Each project is tested on its own. Many companies qualify for some of their work and not all of it — which is exactly why the analysis matters.
Permitted purpose
The work aims to create or improve the function, performance, reliability, or quality of a product, process, formula, technique, invention, or software.
Technological in nature
It relies fundamentally on principles of engineering, physics, chemistry, biology, or computer science.
Elimination of uncertainty
At the outset, there was real uncertainty about capability, method, or appropriate design — not merely about cost or scheduling.
Process of experimentation
The uncertainty was addressed through evaluating alternatives — modeling, simulation, prototyping, systematic trial and error.
What generally doesn’t qualify
Routine data collection, quality control testing, market research, style or cosmetic changes, work performed after commercial production begins, research conducted outside the United States, and activities funded by another party are among the statutory exclusions.
It is not a technology company credit
The most common reason eligible companies never claim it: they don’t think of what they do as research. They think of it as solving the problem in front of them.
Manufacturing & fabrication Tooling, process improvement, automation, new product development
Software developers New platforms, architecture, integrations, performance work
Engineering & architecture Novel structural, mechanical, and systems design
Food & beverage Formulation, shelf life, scale-up, packaging performance
Construction & contractingMeans and methods development, design-build problem solving
Plastics & chemicalsCompounding, tolerance, process yield, materials substitution
Agriculture & agtechCultivation methods, equipment modification, breeding programs
Medical devices & labs Design iteration, validation, testing protocols