The Research and Development (R&D) Tax Credit is a government-sponsored tax incentive offered to companies that create or improve a product or process in the course of their business.

The credit comes in two forms, the first being an investment credit for the company itself, and the second being an income tax credit for its employees. It has been noted that this tax credit has helped spur innovation in the US economy, with more than $1 billion worth of economic benefits reported as a result of it. You can also look for innovation tax credits service through various online sources.

Image Source: Google

What is the Research and Development (R&D) Tax Credit?

The Research and Development (R&D) Tax Credit is a federal tax credit available to businesses that conduct qualifying research and development activities. Qualifying research activities are defined as those that result in new knowledge or improvements to products, processes, or methods. The credit is available on a first-come, first-served basis, and can be claimed against corporate income taxes owed.

Businesses must meet certain eligibility requirements in order to claim credit. In general, the credit is available for expenses incurred during the taxable year in connection with qualifying research and development activities. Expenses that are eligible for the credit include salaries, wages, benefits, contract costs, and other forms of direct costs incurred in carrying out qualifying research and development activities.

There are some limitations on the amount of credit that can be claimed. The maximum amount of credit that can be claimed for an individual business taxpayers’ taxable year is $50,000 per individual or $100,000 per married couple filing jointly. The maximum amount of credit that can be claimed by a corporation is $250,000 per taxable year. Additionally, any unused balance of the credits carried over from one year to another may be used in subsequent years.