The R&D tax credit, which is officially known as the research and experimentation tax credit, is a general business tax credit that was made permanent in the United States of America in 2015. This credit is meant to increase industry around the county by offering businesses tax relief for performing specific forms of research and development. If you think the R&D tax credit is a worthwhile thing for your company to look into, you should continue reading this guide to learn more about it.
It is important for you to understand that this particular tax credit requires businesses to meet a variety of criterion before they can take advantage of it. You’ll learn more about these as you read on. It isn’t always easy to follow everything there is know about the research and experimentation tax credit. If you do not feel as though you fully understand this credit when you finish this guide, which is not unlikely, you should schedule an appointment with a certified public account or a tax preparer who often assists business owners.
The Four Qualifying Elements
There are four main points that dictate whether or not you will be eligible to receive the R&D tax credit in the United States of America. These are featured next.
- The research needs to have to do with creating or improving some business component that relates to your industry. If you intend to improve upon an already-existing component, you need to make sure your project will make it more functional, more reliable, or of a higher quality than it is now.
- The company’s aim must be to learn information that will get rid of any uncertainty that relates to the development or the improvement of the business component it is researching. More-or-less, this prohibits the company from maintaining top-secret documents or meetings that have to do with the project in question; instead, all information must be freely available. For more info about tax credit, visit http://www.encyclopedia.com/social-sciences/applied-and-social-sciences-magazines/tax-credits.
- The company must systematically conduct its research. The government has not, however, dictated which system is required. You could opt to use the stringent scientific method or you could choose a casual trial and error system.
- The project’s basis must lie in technology. This means it has to qualify as either a biological science, a sort of engineering, or something in the field of computer science. Know more about government grants.
Exclusions That Could Relate to Your Project
You should also know about the R&D tax credit exclusions that could prevent you from receiving it even if each of the criterion you just read pertain to you. Some of the most prevalent exclusions are duplication a business component that already exists, reverse engineering something and calling it new, or creating a component that is only going to be used internally within your office’s infrastructure.