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Co-Packing R&D Tax Credits

Co-packing businesses, often known as contract manufacturing firms, assist food manufacturers and packagers in creating and preparing their goods for distribution. Innovations are an irreplaceable part of this industry because packages are the key factors in safeguarding, conserving, and handling products. As a result, companies constantly improve packaging techniques, particularly in terms of efficacy, safety, and environmental impact.

To help businesses deal with the substantial R&D expenses, the government and a number of the US states offer an R&D tax credit in the Co-Packing industry. The incentive usually equals 22% of the total QREs. However, the final amount depends on individual states.

Qualifying Costs and Activities

QREs for the Co-Packing R&D tax credit include every research-related cost, such as third-party contractors, raw materials, and supplies. You can also use this incentive to cover wages for software and mechanical engineers, QA personnel, process engineers, facility and compliance managers, contract manufacturing managers, C-suite, and automation technicians. Moreover, qualifying activities comprise:

  • Assessing dried products in the food product development stage (for instance, dry blending, spray drying, extrusion);

  • Testing products to make sure that production standards are met and upheld (for example, organic, halal, and gluten-free);

  • Advancing current packaging techniques and methods (such as multiwall dairy bag, pouch in carton, and drum);

  • Improving food separation to reduce cross-contamination;

  • Creating innovative products and procedures.

Calculating the Co-Packing research and development tax credit can sometimes be tricky. Therefore, if you need any help, our team can offer you a free estimate. Moreover, we can walk you through the application process without any upfront fees.



What kind of companies can apply?

Co-Packing companies that conduct qualifying research activities.

What data do I need to calculate credit?

Claim period gross receipts.

What information do I need to provide?

General ledger expense detail, payroll records, project notes, project lists, emails, purchase orders, and other documents regarding QREs for the claiming period.

Is credit carryforward an option?

Yes, up to twenty years.

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