Start-ups are focused on developing their product and hiring the right talent, while niche areas of tax planning frequently take a back seat, including the Research and Development (R&D) Tax Credit.
The R&D Tax Credit is a government incentive that rewards companies for creating technology, improving a process or developing new products. The startup specific version of this credit allows Qualified Small Businesses* to recapture a portion of their R&D investment to reduce payroll tax liability, which is one often of the first tax liabilities startups will incur.
To be considered a Qualified Small Business, your company must be within a 5-year window since gross receipts were first incurred and the gross receipts must be below $5M per year. Eligible startups can claim a maximum of $1.25M over a 5 year window, or $250K per year. As your startup continues to grow and begins exceeding these additional criteria, you can claim the traditional version of the R&D Tax Credit to reduce your future income tax liability.
Examples of Qualifying Research Expenses
- W2 Payroll
- Subcontracting costs
- Materials and supply costs
- Leasing of computer space
- Supplies consumed performing the R&D
What can the R&D Tax Credit mean for your business?
- Immediate reduction in your payroll tax liability
- Credits banked for future income tax liability
- Increased valuation
- Freeing up cash to re-invest
Are you asking the following questions?
- How can the R&D Credit provide additional cash flow?
- What companies can claim?
- What can be claimed?
- How do I claim the R&D Tax Credit?
If so, watch our webinar “The R&D Tax Credit for Startups,” which answers these questions. Leyton’s tax and technical team performs the complex calculation and writes up the substantiating claim documentation, this frees up cash and time to reinvest back in your growing business.
Our dedicated industry teams are comprised of highly experienced scientists, engineers, tax accountants, and attorneys, all of whom are motivated to help your business robustly claim and realize the R&D credit to incentivize further innovation investment. Contact us today to learn more!