CEO and Founder of Kruze Consulting
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Oy. Common tax breaks… for startups? Let me start by saying that as a pre-revenue angel/VC backed startup your priority numero uno should be hitting your KPIs. You’re already running at a loss, so investing time in looking for tax breaks exceeds the Cost vs. Benefit rule. Your tax accountant will already be capturing the “breaks” of your startup expenses and legal expenses. So the biggest takeaway I can give here is that Net Operating Losses (NOLs) carry forward. Be sure to capture ALL your expenses even when you’re running at a loss because they can be used as credits when you’re profitable.
Then there’s** the R&D Tax Credit for Startups**, which you should absolutely be taking advantage of if you have revenue and are developing new technology. The four categories that go into the R&D Tax Credit are:
Keep in mind that there are some nuances to the categories above, and you will want to work with your CPA on this. You can easily estimate your R&D Tax Credits using our online calculator. We’ve also published a page outlining the most common tax credits for startups, including some state by state breakdown. But again, remember, that most of these incentives are for companies that are generating PROFITS, so don’t make a ton of sense for VC-backed, money-burning businesses.
Need an accountant for your startup? Kruze Consulting is a leading accounting firm working with seed and venture funded Delaware C-Corps. Kruze Consulting provides all things Accounting and Tax, including interim CFO Consulting, financial modeling, annual taxes, R&D tax credit studies, venture debt consulting, 409A reporting, bookkeeping. Contact Kruze today!
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