Engineering Research & Development Tax Credit Study
How can engineering qualify for the R&D tax credit?
The R&D tax credit (officially “Credit for Increasing Research Activities”) is a dollar-for-dollar reduction to your tax liability and can amount to large savings, not just this year, but retroactively as well. Despite being a huge benefit to engineering companies around the country, the credit it is often overlooked by both big and small companies. From pre-bid meetings over the project specs and concepts to AutoCAD and prototypes, there are qualified activities throughout the engineering process. Our R&D credit specialists stay current with relevant IRS whitepapers, regulations, and case law. This accounting and legal knowledge coupled with extensive experience working with a variety of engineering firms gives us the expertise to assist any engineering company with their R&D tax credit claim.
Example of qualified activities
If an electrical engineer ($100,000 in 2020 wages) spent the entirety of 2020 developing the electrical system designs of a new product in AutoCAD, the tax credit for their development efforts could amount to $10,000. Furthermore, if the employee assisted with the development of a working prototype and the raw materials associated with the prototype amounted to $50,000 you could be eligible for an additional $5,000 in tax benefit, or a combined $15,000.
All employees involved in the development efforts associated with the purpose of improving the manufacturing process or developing the prototype are eligible for the credit. From meetings with potential customers to discuss the specifications and requirements of the product to testing the materials used in the prototype, a variety of activities and expenses associated with the development efforts can be taken via the R&D tax credit.
- Developing new and innovative designs for structures
- Designing and developing new or improved machines, equipment, or tooling
- Development of MEP System designs
- Preliminary design discussions with clients over technical requirements and specifications
- Development of engineering drawings and specifications
- Designing and developing new or improved systems, materials, or products
- Evaluation of alternative materials for construction
- Determining alternative structural designs
- Evaluating alternative subcomponents, methods, and materials for use in designs
- Environmental impact studies
- BIM or CAD modeling/simulation for testing and evaluation purposes
- Implementation of counter-terrorism capabilities
- Evaluation of alternative means and methods of construction
Calvetti Ferguson works with mid-market companies, nonprofit organizations, and high net worth individuals across the country. Regardless of the complexity of the compliance, assurance, advisory or accounting need, our team stands ready to assist you. Please complete the form below, and we will follow up with you shortly.