How to Claim and Maximize the R&D Tax Credit

If your business invests in innovation, you might be leaving money on the table by not taking advantage of the R&D tax credit. This valuable incentive helps businesses offset costs related to research and development, reducing tax liability and freeing up capital for growth.

But how do you claim it? And more importantly, how can you maximize its benefits? Let’s break it down.

What Is the R&D Tax Credit?

The Research & Development (R&D) Tax Credit is a government-backed incentive designed to reward businesses that invest in innovation, technology, and process improvements. It applies to businesses across various industries, not just tech and science companies.

Who Qualifies for the R&D Tax Credit?

Many businesses mistakenly assume they don’t qualify. However, your company may be eligible if it engages in activities such as:

• Developing new or improved products, processes, or software
• Enhancing existing technologies
• Conducting prototype testing
• Experimenting with new materials
• Improving manufacturing techniques

How to Claim the R&D Tax Credit

1. Identify Qualifying R&D Activities – Ensure your business is engaged in eligible innovation efforts.
2. Document Your Expenses – Keep records of wages, supplies, and contract research expenses related to R&D.
3. Calculate the Credit – Use IRS Form 6765 to determine your credit amount.
4. File with Your Tax Return – Submit your claim when filing your business taxes.
5. Work with a Tax Professional – An experienced tax advisor can ensure you maximize your claim and avoid common pitfalls.

How to Maximize Your R&D Tax Credit

• Capture All Eligible Costs – Many businesses underestimate their qualifying expenses. Include employee wages, contractor fees, and supply costs.
• Leverage the Payroll Tax Offset – Startups and small businesses can apply for up to $250,000 of the credit against payroll taxes annually until December 31, 2022. After that date the Inflation Reduction Act increased the election to $500,000 in R&D credits to use against your payroll tax
• Review Prior Years – If you missed claiming the credit in previous years, you might be able to amend past returns to recoup savings.
• Stay Compliant – Maintain detailed records of R&D activities to substantiate your claim in case of an audit.

Final Thoughts

The R&D tax credit is a powerful tool that can lower your tax burden and provide extra cash flow for innovation. If your business invests in new or improved products and processes, you may qualify. Don’t leave money on the table—consult a tax professional to ensure you claim and maximize your credit.

Want expert help with your R&D tax credit claim? Contact us today to see how much you could save!