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R&D Tax Credits by Industry

The US government introduced research and development (R&D) tax credits as a way to reward its most innovative companies with a tax break, encouraging them to stay in the country and have a positive impact on society. But which firms are eligible? You might be surprised at just how many sectors the policy benefits.

We’ll run through eligibility for R&D tax credits by industry, from CBD to software development, along with specifics of which companies and activities are likely to qualify.

R&D Tax Credit Industries

Aerospace & Defense

The world of aerospace and defense is dependent on continuous innovation and evolution, so it shouldn’t come as a surprise that organizations in the industry have to carry out frequent research and development projects. As a result, they’re often eligible for tax credits — especially those that have worked with NASA or government departments.

Technology & Software

Many people instantly think of technology and software when they hear the word “innovation,” so it’s unsurprising that businesses in the sector are some of the most eligible for tax credits. On average, they can claim around 50% back from their expenses from activities like creating new software programs and running tests.

Architecture & Engineering

The design-centricity of Architecture & Engineering creates a healthy opportunity for firms to recoup some of their costs and reinforce their competitiveness. The following activities can qualify for R&D credits: designing building site plans & Drawings, developing master plans, sustainable design, CAD modeling, BIM Modeling.

Agriculture & Farming

In present times, there’s a lot of crossover between agriculture and technology to increase yields and the efficiency of food production. Companies involved with ways to create ways to reduce pests and disease, resist extreme climates, make better irrigation systems, research genetic modification, and similar are likely to qualify for R&D tax credits — as well as those carrying out other yet similar projects.

Manufacturing

Manufacturing might be a staple industry, but that doesn’t mean companies in the industry can’t claim tax credits. A firm can be eligible if they participate in activities that help them improve its offering or launch new products — that includes boosting efficiency and adding automation.

Bio-medical & Pharmaceutical

The medical and pharmaceutical industries are crucial for society. They also involve a lot of innovation since there’s always a new device or product to test or a study to run. Tax credits can be claimed for activities that form part of various stages of development, including lab testing and manufacturing.

Food & Beverage

On a similar note, food and beverage businesses also need to stay on the cusp of innovation due to constantly-changing consumer preferences and the changing competitor landscape over time. The next time you’re researching a new flavor or product, you may be able to use the cost toward tax deductions.

Alcoholic Beverages

You might not think that alcoholic beverages require much technological innovation, but considerable research and development are often necessary to succeed in the industry. A company eligible for the tax credit can claim up to 20% of its R&D-related expenses back.

Industrial Hemp & CBD

Hemp and CBD have emerged out of nowhere to become one of the fastest-growing product segments in the US economy over the past few years, but with so many companies entering the space, getting ahead in research and development requires a strategy and careful planning. Companies involved at various stages of the supply chain could be eligible for tax credits as part of 2018’s Farm Bill. This includes those researching the most effective way to modify crop genetics, firms involved in extracting industrial hemp, and brands trying to create the hottest new formulation or consumables range.