What qualifies for the US R&D tax credit?

Qualified Research Expenses (QREs) include wages for qualified research activities, supplies consumed in research, and 65% of contractor costs. Must meet the 4-part test: permitted purpose, technical uncertainty, process of experimentation, technological nature.

How does the ASC method work?

Alternative Simplified Credit: 14% of QREs that exceed 50% of the average QREs for the preceding 3 years. Simpler calculation than the Regular Credit and preferred by most companies.

Can startups use R&D credit against payroll taxes?

Qualifying small businesses (gross receipts under $5m, no gross receipts more than 5 years) can elect up to $500,000 per year of R&D credit against payroll taxes instead of income tax.

What changed with Section 174 in 2022?

From 2022, R&D expenditures must be capitalized and amortized over 5 years (domestic) or 15 years (foreign) rather than immediately expensed, significantly increasing current-year taxable income for R&D-intensive companies.

Is the R&D credit refundable?

The general business credit is non-refundable, but unused credits carry back 1 year and forward 20 years. Startup payroll offset election produces a direct payroll tax reduction.

US R&D Tax Credit Calculator (ASC and Regular Credit Methods)

Calculate US R&D tax credit using the Alternative Simplified Credit (ASC, 14% of qualifying expenses above 50% of prior 3-year average) or Regular Credit (RC, 20% of incremental QREs).

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Frequently Asked Questions

What qualifies for the US R&D tax credit?

How does the ASC method work?

Can startups use R&D credit against payroll taxes?

What changed with Section 174 in 2022?

Is the R&D credit refundable?