What is the R&D Tax Credit & How Does it Work?

The R&D Tax Credit is the biggest tax credit available to U.S. businesses, yet also one of the most underutilized.

Home > What is the R&D Tax Credit & How Does it Work?
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The U.S. R&D Tax Credit exists to reward American companies for their investment in research and development activities domestically. Each year, the R&D Tax Credit yields billions of dollars of benefits to companies engaged in qualifying research.

How Does The R&D Tax Credit Work?

Signed into law by Congress in 1981, The U.S. Research and Development Tax Credit – sometimes called the Research and Experimentation Tax Credit – helps companies remain competitive by allowing a reduction of federal and state income taxes owed for qualified expenditures.

Benefits of R&D Tax Credits

Investing in research and development is vital to innovation, and innovation is the driving force of the American economy.

With no limit on the R&D Tax Credit funding, U.S. businesses can stand to receive several potential benefits. These benefits might include:

  • A reduction in your company’s federal and state tax liabilities.
  • Carrying forward money saved to reinvest in further research and development.
  • An increase in your cash flow.
  • Generating higher company profits and solidifying your business presence.
  • Gaining the technological advancements to maintain competitiveness.

Many Types of Businesses Qualify for R&D Tax Incentives

It is a common misconception that research and development refers only to research activities conducted in laboratory environments.

Today, the list of industries and sectors that can take advantage of the R&D Tax Credit is growing. In fact, a vast number of American businesses (of all sizes and across a wide range of sectors) may already be involved in activities that qualify but are not yet claiming the credit.

Learn more about what qualifies for R&D and how it may benefit your business by contacting one our our experts.