Tax Credits for Research and Development: An Introduction

One of the most irritating aspects of paying taxes is the fact that one needs to pay them no matter what. To see one’s hard earned money getting away without any return is hard for a business owner. The government however has decided to provide certain amount of relief for those who attend to their duties towards the society. Recently, the government has started doling out tax credits for research and development projects carried out in any industry.

Tax Credits for Research and Development

Every industry needs resources for research and innovation in order to keep the consumers happy as well as not let the industry stagnate. They have certain amount of resources which needs to be distributed to different aspects of the business. Largely, this distribution always creates some sort of dissatisfaction out of distribution of resources. While the sales department might want more funds in order to expand the markets and reach more clients, the production department might want to increase labor pay. Research and development tax credits will be hugely beneficial to the R & D department of an organization and its entrepreneurs would not shy away from spending more on innovation.

The R & D tax credit was enacted in 1981 and it yields billions of dollars in federal and state benefits to companies that indulge in qualifying research.

The advantages of R & D Tax credit

There are several benefits to realizing the R&D tax credit.
These benefits can include the following:

  • For every dollar, 13.5 cents for are available as R&D tax credits
  • A reduction of dollar-to-dollar worth in the federal and state income tax liabilities
  • Earnings per share rises significantly
  • Effective tax create gets reduced
  • Liquidity efficiency and flow improves
  • A carry forward extension of credit for up to 20 years
  • Regulatory developments which have made claiming R&D tax credits very easy
  • Retrospective tax deduction for unclaimed credits up to 3-4 years previously.

Tax Credits for Research and Development

Essentially, these credits and rollbacks act as great incentive measures for industries to focus more on the developmental aspect.  They have a positive impact on organizations and they are inspired to improve upon their existing products/ services/ concepts. It is important then that entrepreneurs have knowledge about the existing criteria and make good use of the facilities available to them.

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