Tax Credit for Increased Research Expenditures
This is available for all entities: corporations, partnerships, LLCs, and the self-employed.
- Has your company discovered information that is technological in nature?
- Does it relate to a new or improved function, performance, reliability or quality?
For tax purposes, research expenses include:
- wages paid to your employees who are directly carrying out the development,
- wages paid to those who supervise or support them,
- supplies,
- rent,
- amounts paid to outside research facilities,
- costs of obtaining a patent, including attorneys' fees,
- any other directly-related expenses.
Market research and normal product testing are excluded.
You have three choices of how to treat research expenses for tax purposes:
- You can claim them as tax deductions in the year paid,
- You can amortize them over 5 years,
- You may be able to claim a tax credit of 12% to 20% of the expenses.
You can choose the option which produces the lowest tax result for your company. Of course, I strongly recommend that you consult with an experienced CPA to verify that your tax return shows the most advantageous option.
Bess Kane, CPA
September, 2011
Burlingame - San Mateo - Foster City CPA Since '88
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