The 2024 Election’s Potential Impact on Tax Policy–Post-Election Version
With the election behind us, and Republican control in the White House, Senate, and House of Representatives ensured, the direction that anticipated...
3 min read
Redpath and Company : June 4, 2021
June 4, 2021 - If your company does any research and development (R&D), the R&D tax credit can minimize your tax liability. But it's not just for manufacturers and engineers. In fact, you probably do more qualifying R&D work than you think, regardless of your industry.
Even if you've looked into it before, it's time to give the R&D credit another look – it can reduce your current tax liability and even offset future taxes.
The R&D tax credit is a dollar-for-dollar credit against the state and federal taxes your company owes (or, in the case of a flow-through entity, the taxes the partners or shareholders owe) for a particular year. Contrary to popular belief, the R&D tax credit is not a deduction on your tax return; it's a reduction in your tax liability.
The R&D tax credit applies to qualified research activities (QRAs), which are defined as activities that develop, improve, or modify existing products or processes. To meet the standard of a QRA, R&D activity needs to meet four main criteria:
Here are a few examples of activities that can count as QRAs for the R&D tax credit:
In 2015, the PATH Act extended the R&D tax credit and permanently expanded its provisions for American businesses. Two major changes were made to the credit under the PATH Act:
To really understand how you can leverage your research and development work to reduce your taxes, here are answers to some frequently asked questions about the R&D tax credit:
The state and federal R&D tax credit are an incredible opportunity for many corporations, but few realize how much they could be saving simply because they don't realize they're eligible for it. Talk to your CPA or trusted advisor today about how to track the R&D work you do and get rewarded for it on your taxes.
With the election behind us, and Republican control in the White House, Senate, and House of Representatives ensured, the direction that anticipated...
Editor's note: This piece was originally published in 2020 and has been updated to reference new changes in Illinois state law.
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