The Research and Development (R&D) Tax Credit is a great way for American companies to take advantage of federal and state tax savings to grow their business. Organizations across a variety of industries can benefit from this tax credit if they claim it. Unfortunately, many businesses aren’t aware that they can!
Here’s a quick overview of the R&D Tax Credit, who can claim it, and how to do so.
What is the R&D Tax Credit?
The R&D Tax Credit was created to encourage businesses in America to pursue innovation and to increase technical jobs in the U.S. This tax credit is intended for businesses of all sizes, not just massive corporations with research laboratories. It’s also for companies of all industries that complete a broad variety of activities that qualify them for the tax credit. What is the R&D tax credit? Visit this website to know more information.
Who can claim the R&D Tax Credit?
Now that you know the answer to, “Who can claim the R&D Tax Credit?” you might be wondering if your business qualifies. Essentially, any tax paying business that develops, designs, or improves products, processes, formulas or software can claim the tax credit.
Of course, that answer is very broad, so try answering these three simple questions to determine whether your company can claim the R&D Tax Credit:
- Does your company work to improve existing products or processes?
- Does your company develop or improve current software or prototypes?
- Does your company develop or design brand new processes or products?
If you answered “yes” to any of the questions listed above, your company can claim the R&D Tax Credit!
How can qualifying companies claim the R&D Tax Credit?
To claim the tax credit, companies must be able to show adequate evidence that they engage in the research and development activities listed above. That means they must keep accurate and detailed records of their activities to create a tax credit claim.
Examples of the types of records you’ll need to claim the R&D Tax Credit include:
- Payroll records
- Project notes and lists
- General expense ledger
If your company can produce the above documents and present evidence that you pursue research and development in the U.S., you’re well on your way to claiming a cash credit and reducing future federal and state tax liabilities.
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