R&D Tax Credit Expense Categories

Tue, 6 February 2018 - Vanessa Kruze

Video: Which R&D Tax Credit Expense Categories to Apply to Your Startup?

If you haven’t heard, R&D tax credits have really changed dramatically over the past couple of years.

A lot of our startup clients are now getting big checks in the mail for 50, 100, up to 250 grand back from the IRS, so this is a big deal.

You’re definitely going to want to check and see if you are eligible for the R&D tax credit expense. After we’ve determined if a client is eligible for the R&D tax credit expense, we then have to do a study to see what types of expenses we can put into this credit calculation.

There’re four things that you really want to keep in mind, the first of which is wages. Those are folks who are on your payroll. Chances are they’re the engineers, they’re the folks who are really working on the research and development day-to-day. You do have to have special time tracking mechanisms just to make sure that they are working on the new stuff as opposed to just maintaining some of the existing product lines that you may or may not have.

The second thing that you’re going to want to keep in mind is subcontractors. These are the folks who you’ve subcontracted with, and they are specifically doing R&D work.

The third thing that you’re going to want to keep in mind is supplies. Usually, we just see this for our hardware companies. Could be all the widgets that you’re putting into your new robots or into your new piece of hardware or computer, but supplies are definitely a big thing for folks who are building out some sort of tangible good.

The last thing that you want to keep in mind is leased computers. We actually rarely see this one, but it’s definitely one of the buckets to consider when you’re calculating the R&D tax credit expense.

 

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