Tax Credits for Research and Development Available in America

In the United States, tax credit support is available from the federal government and from a number of states.

The Federal Program:

The Investment Tax Credit for Increasing Research Activities

amflagThis program is sometimes called “The Research Credit” and is granted under Section 41 of the Internal Revenue Code. The law provides for a R&D tax credit equal to 20% of all qualified research expenditures over a certain base amount. With this program, taxpayers can recover taxes paid up to three years in the past.

In order to demonstrate that qualified research has taken place, it is necessary to show that work was undertaken which was technological in nature. The work must have been intended to improve an existing, or develop a new, business component of the taxpayer. In addition, experimentation must have been conducted.

The federal Research and Development Credit may be claimed on IRS Form 6765. Depending on your circumstances, you may also be required to file IRS Form 3800 for the General Business Credit.

State Programs:

Various states from Maine to California offer some type of support for R&D conducted locally. For example, Massachusetts offers a R&D credit equal to an additional half of the federal credit for qualified work undertaken in the Bay State. California offers a credit which can match or exceed the federal program.

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