What can the R&D Tax Credit be used for?

The R&D Tax Credit is a dollar-for-dollar reduction of federal income or payroll tax liabilities. R&D credits can be claimed on amended tax returns (going back three years), which can generate cash refunds due to overpayments in those years. Additionally, federal R&D Tax Credits roll forward for up to 20 years. 

For qualified small businesses (i.e. startups), these credits can be used to offset payroll tax owed to the IRS. Therefore, startups no longer need to be profitable to take advantage of the R&D Tax Credit.

In addition, most states also have an R&D Tax Credit available to offset various income, franchise, or sales and use tax liabilities.