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IMA Tax Policy Blog

Are You Leaving Research Tax Credit Money on the Table?

RSM is an audit, tax, and consulting firm and a member of the IMA…


The federal research and development tax credit can be a tremendous tax planning tool, but it can also be easily misunderstood. Don’t let misconceptions about the R&D credit keep your company from pursuing its benefits.

What types of companies qualify for the R&D credit?

Many, many different companies qualify for the R&D credit. It really goes across the board. Often mistaken to be a manufacturing only credit, the R&D credit isn’t restricted to manufacturers only. Very often process developments—whether they’re business process developments, manufacturing process developments, software development—qualify, in addition to lean development.

What if my company hasn’t developed anything “revolutionary” or successful?

Your effort doesn’t have to be revolutionary, it only needs to be evolutionary. So improvements qualify as well. New product development qualifies. Improvements to existing products qualify.

Again with business process, improvements qualify in addition to new processes. With software development, developing a new module or making it more robust would also qualify.

How can my business benefit from the R&D tax credit?

The R&D tax credit can reduce your company’s effective tax rate, improve cash flow and increase project return on investment. The average federal tax credit is about six and a half cents for every dollar spent on R&D. Most states have an R&D credit as well.

An R&D study can determine if your company is eligible, and the average benefit outweighs the cost by five to one.

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