Qualified Research Expenses (QREs) include investments in almost all phases of the Software Development Lifecycle (SDLC) - as well as more concrete expenses, such as cloud server rental expenses related to R&D activities. For a detailed list of what qualifies as R&D in software and technology development, see our comprehensive article on qualifying activities and expenses. The R&D Tax Credit provides opportunities for software companies of all sizes in almost any industry to offset tax liabilities. In addition to the federal credit, many states offer tax breaks. Pre-revenue companies and start-ups with less than five years of revenue can use the federal R&D tax credits to offset future payroll taxes.
The following software and technology industries have claimed significant R&D tax credits, receiving much-needed capital to reinvest in their workforce, infrastructure, and continued innovation:
Example activities that qualify:
Do you have these job titles on your payroll, or do you hire third-party contractors to do these jobs?
Unsure of whether your software and technology projects qualify? The innovations your company has been working on may be eligible for significant tax breaks. Strike Tax Advisory employs tax experts, and technologists, with years of experience in R&D Tax Credits. At Strike, we work on a success-based fee structure enabling businesses in the software & technology industry to claim R&D credits/refunds without any out-of-pocket costs. We offer complete audit protection and a money-back guarantee. Use our R&D Tax Calculator to estimate your potential benefit, and partner with Strike to claim your tax credits with no up-front costs. Contact one of our experts today.
The R&D Tax Credit was created to incentivize companies across multiple industries to keep high-tech jobs in the United States. Companies can claim employee wages, supplies & raw materials, computer rental costs, and third-party contractor expenditures incurred throughout the R&D process. Current law permits companies to amend prior year tax returns (going back three years), offering additional financial benefits from tax refunds. If you cannot use the R&D credits immediately, the IRS allows taxpayers to carry credits forward up to 20 years.
Average of total software development expenses that typically qualify
2019 federal tax credit of a mid-size software company with 16 employees
The amount qualified startups can offset payroll taxes per year
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Benefits for the R&D Tax Credit vary from state to state. Get an accurate estimate of what your potential state tax credit!
