You may be qualified for federal and state R&D tax credits equaling up to 25% of qualified spending if your business has paid for software that has been developed or improved in the United States. The incentives can even be higher if your company is funding these programs outside of the United States.
Many startup and established enterprises in the technology sector have been able to expand their workforces, make investments in cutting-edge technology, and fund other corporate goals thanks to these dollar-for-dollar credits against regular income tax liabilities.
Even if you don’t pay taxes, you can still benefit from R&D tax credits since many states will pay you the value of your credit, let you sell it or transfer it for cash, and let you carry state and federal credits forward to previous and later tax years.
Are You a Qualified Technology Company?
If you pay any of the following workers or independent contractors to create or enhance your software, your business can be eligible for R&D credits:
Software Engineers
Software Developers
Software Programmers
Software Architects
Applications Engineers
Hardware Engineers
Engineering Technicians
Control Systems Engineers
Applications Engineers
Systems Analysts
Network Engineers
Database Architects
Analytics Engineers
Product Engineers
Which Projects Are Eligible for the R&D Tax Credit?
Examples of acceptable activities are:
Software for sale
Software for use within your company
Initial releases of application software
Algorithms created for fundamental, underpinning, or basic computer operations, such as new or enhanced techniques for sorting, searching, or data compression
Architectures
Database management techniques
Software systems
Software created as a component of a hardware product, interacting with that hardware directly to make the hardware/software bundle work as a whole.
Activities related to compilers’ designs for memory management, process scheduling, and instruction execution optimization
Operating systems
Specialized technologies, e.g., image or signal processing, artificial intelligence, speech recognition
Mobile applications
Video games
Artificial Intelligence
Virtual Reality
Augmented Reality
To learn more about figuring out and claiming the R&D Tax Credit contact us!