Research & Development Tax Credit

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The Protecting Americans from Tax Hikes Act of 2015 (2015 PATH Act) contains a provision making the research and development (R&D) tax credit permanent. The government’s hope is that this change — making the credit permanent and reducing the restrictions on who may benefit from it — will encourage businesses to invest more in R&D than they otherwise would have planned.

Do you or your organization perform services, or pay others, to design or improve a product or process? If so, you may be missing out on important R&D tax credits that can save you and your organization thousands of dollars. Generally, all W-2 wages for employees engaged in qualified research activities, as well as outside contractors and suppliers, qualify for the R&D tax credit.

Beginning in 2016, the R&D tax credit may be applied against a taxpayer’s AMT liability, and the credit can be used by businesses in beginning stages against the Social Security portion of the employer’s payroll tax (i.e., FICA) liability. These expansions make the credit available to many small business owners who previously would not have been able to realize the benefits.