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By Sean Barbera • February 20, 2019

The R&D Tax Credit A Strategic Tax Advantage

The R&D Tax Credit: A Tax Strategy Designed to promote economic growth in the U.S.

What is it?    A dollar-for-dollar credit against taxes owed.
R&D tax credits directly offset federal and state tax liabilities flowing through right to the bottom line.
R&D tax credits can amount to as much as 20% of the costs incurred in developing or improving products, fabrication processes and software


Not only is there a Federal R&D Tax Credit opportunity
There are State R&D Tax Credits: Over 35 states also have research credit incentives

Qualifying Research Activities

  • Develop new or improved products
  • Develop new or improved fabrication processes
  • Develop new or improved software
  • Develop new or improved technique
  • Unsuccessful development of any of the above

Examples of Qualifying Research Activities
Life Sciences - Develop new therapeutic drugs, medical devices, etc.
Distribution - Develop an advanced software system for managing inventory at multiple storage locations
Manufacturing - Design, develop and testing to improve a fabrication process
Any Industry - Software development for an internal use ERP system

Qualifying Research Expenses (QREs)
  • Taxable Employee Wages
  • “Consumed” Supply Expenses
  • Contracted Labor Costs
  • Leased Computer Expenses

Examples of Qualifying Research Expenses
Taxable Employee Wages:   Scientists, Engineers, CEO, Quality Control, etc.
Consumed Supplies:  Chemicals, lab supplies, molding, sterilizing and finishing materials
Contract Labor Expense:  Third-party software developers, tool makers, testing labs, etc.
Leased Computer Expense:  “Cloud” hosting – Amazon Web Services, Rackspace, etc.

Path Act of 2015
  • Made the R&D Tax Credit Permanent
  • R&D Credits can be used to offset FICA tax for “Qualified” Small Businesses
  • R&D Credits can be used to offset alternative minimum tax (AMT) for “Eligible” Non-public Small Businesses

FICA Tax Offset Qualified Small Businesses:
  • Corporations or partnerships having gross receipts of $5,000,000* or less during the taxable year, and
  • Did not have gross receipts for any year preceding the 5-year period ending with the taxable year.
* All businesses under common control.

Tax Cuts and Jobs Act (TCJA)
  • Reduction of the Corporate Tax Rate to 21%
  • Elimination of Corporate Alternative Minimum Tax
  • 20% Pass-through Deduction on Qualified Business Income
  • 79% Reduced Credit Under Section 280C


 $10,000... $100,000... $1,000,000
How would you reinvest that money back into your business?

This information and webinar were presented by Steve Powers, President of Intrepid Advisors

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