Research and Development Tax Credits
Technology has transformed today’s business environment. It is essential for companies of all sizes to prioritize innovation to remain competitive. Taxpayers within the Technology Industry should consider taking advantage of the Research & Development Tax Credit benefit.
The research credit provides dollar-for-dollar cash savings each year for companies performing activities related to the development of new or improved products and processes. These benefits could provide much needed cash to hire additional employees, increase R&D, expand production facilities, etc. Examples of R&D activities related to the technology industry as well as potentially qualifying job titles are listed below.
Examples of Qualifying R&D Activities
- Alpha / Beta testing
- Application and platform design and testing
- Automation of internal processes by developing and implementing new hardware and software systems
- Coding, programming, testing (e.g., functional, integration, user interface)
- Computer-aided design (CAD)
- Developmental cloud computing activities
- New architectures, new algorithms, or new database management techniques
- Software and hardware product development related to communication and interaction
- Specialized technology design (e.g., image processing, artificial intelligence, or speech recognition)
- System software development (e.g., operating systems, compilers)
Potentially Qualifying R&D Job Titles
- CAD Designer
- Director of Software Engineering
- Senior Technical Leads
- Software Analyst
- Software Developers
- Software Integration Engineers
- Software Engineer
Applicable Technology Verticals for the R&D Tax Credit
- Application & Productivity Software
- Artiﬁcial Intelligence & Machine Learning
- Life Sciences / Pharmaceuticals
- Virtual Reality & Augmented Reality
AMT Offset up to $250,000 in Payroll Tax
For tax years beginning after December 31, 2015, eligible small businesses (those with $50 million or less of gross receipts) may claim the research credit against AMT liability. In addition, qualified start-up companies may elect to use up to $250,000 of the research credit against payroll taxes.
Treasury Regulations have substantially broadened the range of taxpayers who are eligible for the credit. Start-ups to publicly traded businesses who were previously unable to realize a benefit from this lucrative tax credit should reassess their eligibilities.
At KROST, we provide advisory services for companies designing and developing products. Our experts allow qualifying companies to obtain maximum benefits by lowering tax obligations and increasing overall earnings.