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R&D Tax Credit
The Most Powerful Incentive Available to American Businesses
The R&D tax credit rewards solving real business challenges—testing new approaches, improving processes, and refining products. It’s applied science in action, turning ideas into capital that drives growth.
Why businesses shouldn’t overlook the R&D tax credit
Going beyond simple tax savings, this incentive gives business the edge they need.
New Legislative Changes
Recent updates have expanded and strengthened the R&D credit, reflecting Congress’s intent for businesses to fully benefit from this incentive.
Lower Taxes & Increase Cash Flow
Claiming the credit reduces your tax liability and frees up cash to reinvest in your business.
Stay Competitive & Build Talent
The credit rewards innovation while helping you attract and retain the technical talent who drive your success.
Take Bigger
Risks
Experiment and test new ideas with confidence, knowing the credit helps offset the cost of innovation.
CASE STUDIES
$18M ARCHITECTURAL FIRM
$244,000 IN FEDERAL R&D CREDITS
The firm developed new architectural designs for office, industrial, retail, medical and high-tech structures. Engineers experimented with materials and construction processes, tested functionality and performance improvements, and enhanced durability when technical issues arose. Material-related uncertainties required iterative design evaluation and systematic improvements.
$50M EPC COMPANY
$3,900,000 IN FEDERAL & STATE CREDITS
The Engineering, Procurement, & Construction (EPC) company designed and developed a fractionator with butane splitter for natural gas processing. Engineers experimented with computer modeling and systematic trial-and-error methods, tested multiple design iterations for transportable disassembly, and optimized layout calculations. Complex design uncertainties required iterative engineering processes and component sizing improvements.
$560M FEEDYARD
$1,500,000 IN FEDERAL AND STATE CREDITS
The company developed new feed formulations to produce quality meat products. Nutritionists experimented with ingredient combinations, tested biological effects on livestock health and performance, and optimized rations for seasonal changes. Feed-related uncertainties required iterative formulation processes and systematic nutritional improvements.
$514M ELECTRONIC COMPONENT MANUFACTURER
$6,088,597 IN FEDERAL AND STATE CREDITS
The company redesigned a connector to address product deficiencies. Engineers experimented with 3D modeling and prototype testing, modified latching mechanisms and minimized materials, and balanced higher forces with additional plastic reinforcement. Design uncertainties required iterative development processes and experimental connector improvements.
How does the research & development tax credit work?
The R&D tax credit is calculated based on a company’s qualified research expenses (QREs) and provides a percentage of these expenditures as a dollar-for-dollar tax credit. QREs typically encompass four main categories:
• Wages paid to employees conducting, supervising, or supporting qualified research activities
• Supplies and materials used in the research process
• Software and cloud computing costs related to development activities
• Contract research expenses (limited to 65% of actual costs) paid to third parties performing qualified research on the company’s behalf
What industries qualify for the R&D tax credit?
Traditional “R&D” industries, such as engineering and software development, are only the tip of the iceberg for the types of companies that can claim the R&D Tax Credit. Industries that can qualify for the credit include:
- Aerospace
- Agriculture
- Automotive
- Building System Controls
- Chemical
- Engineering
- Food & Beverage
- Life Sciences
- Manufacturing
- Metals
- Oil & Gas
- Software
What activities qualify for the R&D tax credit?
To qualify for the R&D Credit, your activities must meet all elements of the four-part test:
- Development or improvement of business components, such as products, processes, software, techniques, inventions, or formulas, held for sale, lease, or license
- Technological in nature, i.e. rooted in a hard science such as physics, biology, computer science, or engineering
- Elimination of technical uncertainty related to functional elements of a business component’s design, excluding non-scientific areas such as marketing or consumer preference
- Process of experimentation to resolve technical uncertainty – even iterative trial-and-error can qualify
How to claim the R&D tax credit?
The formal claim process requires submitting IRS Form 6765 (Credit for Increasing Research Activities) with your company’s annual tax return. You can also claim credits for prior open tax years through amended returns.
Recent changes to Form 6765 require you to provide a basis for qualification, highlighting how you arrived at the claimed credit value and how activities were tied to projects. Working with experienced professionals ensures you’re presenting the proper documentation of your research activities, which can include employee time tracking, design documentation, testing reports, and financial records.
How far back can you claim R&D tax credits?
Companies can typically claim R&D tax credits for the current tax year plus the previous three tax years. This lookback period allows businesses to recover previously unclaimed credits, but only within a specified timeframe.
Does alliant work with CPAs?
Yes, we have partnered with over 4,500 CPA firms to provide comprehensive R&D tax credit services. We work collaboratively with accounting professionals to ensure proper documentation, compliance, and maximum benefit for their clients while maintaining the highest professional standards.
Frequently Asked Questions
ALLIANT ADVANTAGE
Insight You Can’t Get Anywhere Else.
Expert-Guided.
Gain an edge with direct access to leading industry experts, policymakers, and former IRS commissioners, who deliver unmatched insights to help you implement new technologies, navigate regulations, and maximize ROI for your business.
Trending R&D Topics
Get the insights and documentation templates you need to identify qualifying activities and streamline your credit claims process.
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