Are You Maximizing Your Federal And State Research Tax Credits?

Many companies incur research costs to discover new products and/or improve and enhance outdated or legacy products. If you are not claiming or maximizing the research and development R&D tax credit on your federal or state tax returns, you are missing out a potential tax benefit.

What are the benefits of computing the research and development R&D tax credit?

  • A dollar-for-dollar reduction of income tax liability
  • If there is no income tax liability in the year(s) of computation, the Federal credit can be carried forward for 20 years to offset future income tax liabilities. 
  • New Jersey and Pennsylvania research credits may be sold, if qualified. NY and NYC offer a refundable tax credit.

What is qualified research?  

  • Activities that rely on the principles of physical sciences, biological sciences, computer sciences, or engineering;
  • Activities that involve a process of experimentation;
  • Activities intended to discover information for developing or improving a product or process;
  • Activities that relate to a new or improved function, performance, reliability and quality.

What costs qualify for the federal research and development R&D tax credit?  

  • Salaries and wages of employees engaged in qualified research;
  • Materials and supplies used in qualified research;
  • 65% of amounts paid to third-party contractors performing qualifying research.

How do you capture all these costs efficiently and determine how to maximize your federal and state benefit?

By performing an R&D tax credit study that will assist in:

  • Identifying and analyzing qualified research activities:
  • Determining the amount of qualified research expenses;
  • Computing the federal and state research credits;
  • Preparing a summary report with analysis of the research credit computations.
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