The Different Benefits of R&D Tax Credits
The Research & Development Tax Credit or the R&D Tax Credit was made in 1981 as a part of the Economic Recovery Tax Act that helps companies to stay competitive in the global marketplace. Also, this kind of credit was permanently made official in January 1, 2016. But, there are only about 1 out of 15 small to mid-sized firms that are taking the full advantage of the R&D Tax Credit because of the misrepresentation about it in tax credit laws or due to lack of information.
Through this article, you will learn on some of the reasons with why a R&D Tax Credit is really beneficial:
Helps Increase the Bottom Line
With this kind of tax credit, it could actually help reduce the state tax and federal liabilities of a firm. Any company that’s involved in R&D could get about 10 – 15% or more ROI for the qualifying business activities. Credits like these are considered also as assets because it is able to help increase the market value of a company and it likewise helps to strengthen it as an acquisition target. The money is then going to be saved and will be invested towards new R&D projects that helps in generating cash flow and growth for the company for any future operations. Tax credits like this is actually an offset against the tax liabilities and this also could be carried up to 20 years.
Motivate on Innovation
Such type of credit in fact is made available for the companies who process, improves, develops, designs, invents and so much more. The companies will then be rewarded on the improvements and this credit will then help to generate high paying positions and also company profits. These components are then going to be produced on a consistent innovation which is essential to remain competitive, which in fact is why the IRS wants to give your company ROI.
IRS actually helped to broaden the definition of R&D. Qualified Research Activity (QRA) actually consist any form of activity which is part of the IRS Four Part Test. Such test will need a new or an improved business component to where it must be technological in nature, eliminate on uncertainty and process experimentation.
Maintaining your Business’s Competitiveness
There are many states today that are offering R&D tax incentive in supplementing Federal Research and Development Tax Credit. Any company would take advantage on such credit and be able to claim upwards on R&D Tax Credits, which then makes it one of the biggest tax credits that are now available. An incentive like this will allow companies in producing innovative technology which will allow a country to remain competitive in the globalized economy we have now.