The R&D Tax Credit is an incentive credit for entrepreneurs under section 41 of the Internal Revenue Code that is headed as ” 26 U.S. Code § 41 – Credit for increasing research activities“.Under this provision of law, a portion of the expenditure incurred by the taxpayer in carrying on research (R & D) necessary for carrying on business is allowed tax credit. Hence, this tax credit is a super saver on tax for small businesses. Not only the federal government, but many states also provide incentives for R & D by business entities.
What is the R&D tax credit?
The research tax credit or R & D tax credit is designed for companies developing new or innovative products, processes, computer software, techniques, formulas or inventions, that result in new or improved functionality, performance, reliability, or quality. The research tax credit is available at the federal and state level, but this post is devoted to Federal tax credit for R & D.