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April 11, 2017

R&D Tax Credit

R&D Tax Credit

Livingston, NJ – In December of 2015, the Research and Development Tax Credit, or R&D Tax Credit, under section 41 of the Internal Revenue Code, was made permanently available to businesses as a credit for increasing research activities by the “Protecting Americans from Tax Hikes Act of 2015” (PATH Act).   

Designed to garner confidence in research and experimentation conducted within the United States, the PATH Act made several temporary tax provisions permanent, including the R&D Tax Credit. In turn, this act eliminated the ambiguity of whether or not the credit would be extended by Congress each December. Offering incentives for innovation, the Research Credit prevents significant tax increases on American companies and makes it easier for them to plan for the future, hire new workers, develop their businesses and invest in their community.

Businesses may claim the R&D Tax Credit for expenditures related to the research and development of a product, including formulas, inventions, patents, pilot models, processes, techniques and similar properties. These expenses are outlined as reasonable costs that a business or trade encounters for actions aimed at eliminating uncertainty about the development or enhancement of a product.

The R&D Tax Credit allows businesses to earn credits on wages, supplies and even outside services related to the scientific, engineering or technological improvement of a product. As such, companies who claim the R&D Tax Credit may be able to lower their federal tax bill as much as 10% while possibly saving more in state and local taxes. This allows businesses to reinvest money into their own company or strengthen their bottom line. Common industries that may be able to claim the R&D Tax Credit include automotive, aerospace and advanced manufacturing, as well as food processing, light manufacturing, software development and pharmaceutical companies.     

Since 1969, Wiss & Company, LLP has been providing tax services to business professionals in New Jersey and the surrounding areas, serving companies of various sizes and industries. Contact the experts at Wiss & Company to see if your business qualifies for the R&D Tax Credit, so you can claim the credits your company may have earned.