R&D tax credit-qualified expenses & how to claim them

Companies from all industries conduct activities that qualify for the US research credit.

Home > What Expenses Qualify for R&D Tax Credit?
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What Kind of Research and Development Activities are Eligible?

Any corporation, organization, trust, estate, or individual can claim R&D tax relief if they are involved in conducting the following activities below:

R&D credit – qualified activities:

  • Activities that are technical in nature or that involve design, development, or improvement of new or existing:
    • Processes
    • Products
    • Techniques
    • Formulas
    • Inventions
    • Software
  • Activities focused on making improvements in:
    • Performance
    • Functionality
    • Reliability
    • Quality
  • Qualifying expenditures can include:
    • U.S. wages (including supervising and support staff)
    • U.S. contractor costs
    • Materials and supplies used for R&D
    • Cloud computing development expenses

Find out what activities from your industry qualify below

The Four-Part Test

Established by the IRS, a four-part test can help you to identify whether your company’s research and development activity qualifies for R&D tax credit.

#1: Permitted purpose

The activity itself must relate to creating a new business component or improving the function, reliability, quality, or composition of an existing one. It does not have to be a general, industry-wide advancement, just one that’s innovative to your company’s products or processes.

#2: Elimination of uncertainty

The intent of the activity must be to discover information that seeks to eliminate uncertainty concerning the capability, design, or methodology of the process or product in question. Put simply, changing something purely for aesthetic purposes would not be an eligible activity.

#3: Process of experimentation

A qualifying activity must demonstrate the evaluation of alternatives for achieving the desired result. This might include processes such as simulation and modelling, systematic trial and error, and iterative designs.

#4: Application of scientific principles

The activity must rely on fundamental technological principles and be rooted in the hard sciences, such as engineering, biology, physics, chemistry, or computer science.

What Types of Businesses Can be Eligible?

Simply select an industry or sector to find out more about what qualifies for R&D tax relief: