2018 Key Takeaways for the Research and Development Tax Credit
The R&D Tax Credit is constantly changing. While much of the tax code is antiquated, portions of the tax code, such as the research credit can be manipulated to reflect changing economic conditions. Over the last couple of years, we have seen the credit become a permanent fixture of the code*. In addition, Congress added enhancements to the credit that are for the specific benefit of small businesses and startup companies.
Specifically, eligible small businesses are now allowed to further reduce tax liabilities below any alternative minimum tax levels, once a hindrance to their utilization of the credit. In addtion, eligible startups are also able to offset their payroll tax liability, an important update for technology companies regardless of if they are profitable or not. Startups incurring high payroll for their technical talent will benefit from a payroll tax credit up to $250,000 a year. In addition to the legislative changes, the IRS has continued to place focus on the business component requirement in R&D claims. Companies need to care about the business component requirement when putting together an R&D tax credit claim because it forms the basic for determining qualified activities and calculating qualified expenses. Luckily, Indago can help your business navigate these complicated tax matters.
If you’re looking to implement the Research and Development Tax Credit into your tax planning this year it’s increasingly important that you’re aware of the legislative changes that were recently made. Several of our Indago R&D practitioners had the pleasure of attending the National R&D Tax Symposium in Washington D.C. last fall. There are several takeaways that we will highlight over the next few posts so that any company and their CPAs are more informed on this advantageous incentive.
Stay tuned for our next post: “What Does the Future Hold for the Research and Development Tax Credit?”
*the Research and Development Tax Credit became a fixture of the tax code with the passing of the Protecting Americans from Tax Hikes (PATH) Act 2015