Maximize the R&D Tax Credit for Your Manufacturing Company
Written by Since the early 1980s, the federal research and development (R&D) credit has been a powerful incentive in driving technology and innovation in the United States. The credit rewards businesses that invest in new and improved products and processes.
Manufacturing and technology companies in particular are great candidates for the credit; however, many manufacturers either miss a credit opportunity altogether or do not capture the full array of costs that may be eligible. As the global market becomes more difficult and competitive for manufacturers, the credit should not be overlooked as an excellent tool for subsidizing your R&D costs.
Overview of the R&D credit
In general, businesses that undertake a process of experimentation in order to create or improve a product or process can qualify. The major costs that can be captured are:
Wages of individuals performing, supporting, or supervising R&D activities
Supplies used in the R&D process
Amounts paid to outside consultants or contractors for the performance of R&D-related activities
Many of the rules were written expressly for taxpayers engaged in manufacturing. What’s more, some of these rules have been liberalized in recent years, and many states also offer R&D credits to help minimize your state tax liabilities. Here are some highlights that manufacturers should have in mind when considering the R&D credit.