ICS Tax, LLC: 10 Year AnniversaryConnect with us
Services/R&D Tax Credits

Research & Development Tax Credits

A Valuable Tax Credit that Fosters Innovation

Current planning noteFor tax years beginning after 2025, Form 6765 Section G is generally required, subject to IRS exceptions. Study design should preserve business-component and expense support at the required level.

Request a benefit estimate

Tell us about the property, project, or activity. A specialist will follow up with a free benefit estimate.

Overview

The Research and Development (R&D) tax credit is a Federal tax incentive that rewards taxpayers for increasing investment in U.S.-based research activities. This credit was first introduced by Congress in 1981 and made permanent in 2015. The One Big Beautiful Bill Act (OBBBA) restores same-year deductions for U.S. research costs from tax years starting after December 31, 2024, but keeps 15-year amortization for foreign research. New IRC §174A allows an optional 60-month write-off and treats immediate expensing as an automatic accounting-method change with no §481(a) adjustment needed.

The R&D tax credit is available to businesses that design, develop, or improve products, processes, techniques, formulas, or software. Correctly calculating and properly documenting the R&D tax credit is critical because it can greatly lower taxes and increase cash flow.

Qualified Expenses

The R&D tax credit is available to taxpayers who incur incremental expenses for Qualified Research Activities (QRAs) conducted within the U.S. While primarily a wage-based credit, the credit is comprised of the following Qualified Research Expenses (QREs):

  • Internal wages paid to employees for qualified services; this includes those individuals directly performing the science as well as those individuals directly supporting and supervising these individuals.
  • Supplies used and consumed in the R&D process.
  • Contract research expenses (when someone other than an employee of the taxpayer performs a QRA on behalf of the taxpayer, regardless of the success of the research).
  • Basic research payments made to qualified educational institutions and various scientific research organizations.

Our proven process

An R&D study is only as good as how well we understand your business. We spend time with your engineers, walk your floor, and learn where the hard problems are.

Qualify

A no-cost feasibility conversation.

  • We tell you what the credit is worth before you sign.
  • If there is no credit, we say so.

Scope

A success-based fee: a percentage of what we deliver.

  • No retainer, no hourly billing.
  • No invoice if the study does not produce.

Gather

One structured request package.

  • Every item assignable to your team.
  • No spreadsheet for you to maintain.

Analyze

Technical interviews with your engineers.

  • Components tested against the four-part test.
  • Contract and funding review.

Deliver

Write-ups tied to your records.

  • Schedules reconciled to the general ledger.
  • Form 6765 support, including Section G.

Support

We respond to IDRs.

  • We defend the methodology on examination.
  • Available to your CPA at filing.

Four Part Qualification Test

Research counts toward the federal research credit only where all four parts meet.

  1. 01

    Technological in nature

    The work relies on the principles of engineering, computer science, or the physical or biological sciences.

    Passes: Writing software that compresses sensor data in real time

    Does not pass: Surveying customers to pick a new product flavor

  2. 02

    Permitted purpose

    The goal is a new or improved product, process, software, technique, formula or invention: better function, performance, reliability or quality.

    Passes: Redesigning a pump so it uses less energy

    Does not pass: Changing a product's color or packaging for looks alone

  3. 03

    Elimination of uncertainty

    At the start, it was not clear whether it could be done, how, or with what design.

    Passes: Not knowing which alloy will hold up at the required temperature

    Does not pass: Building a part to a design that is already proven and documented

  4. 04

    Process of experimentation

    Substantially all of the work, 80 percent or more, goes into testing alternatives to resolve that uncertainty.

    Passes: Modeling and prototyping three heat-sink designs to find one that meets the spec

    Does not pass: Routine quality-control testing of finished products

Qualified research

Examples are simplified. Whether work qualifies depends on the facts of each project.

Benefits

The R&D tax credit is primarily a wage-based federal credit, which is worth up to 10% of qualified research expenses. Thus, a taxpayer with $1M of qualified wages could receive a benefit of up to $100,000. Many states also offer R&D tax credit that can greatly enhance the value of the study. Further, the credit can often be claimed for prior tax years.

The types of businesses that can benefit from an R&D study is far more expansive than what most people expect. Many of these industries have claimed the credit: Aerospace & Defense, Electronics, Architecture & Engineering, Food Science, Agriculture, Manufacturing, Automotive, Pharmaceuticals, Biotechnology & Bioengineering, Software Development, Chemicals, Telecommunications, and many more.

When the R&D credit was made permanent, it was expanded to allow a larger number of taxpayers that have been unable to take advantage of the credit previously.

  • Small businesses can now take the R&D tax credit against their alternative minimum tax (AMT). The previous AMT restriction prevented qualified companies from utilizing the research credit, but new changes removed that hurdle for any qualified company with less than $50 million in gross receipts.
  • Startup businesses with gross receipts of less than $5 million can now take the R&D tax credit against their payroll taxes (essentially making it a refundable credit for up to five years).
  • Retroactive application: Qualified small businesses (average annual gross receipts of $31 million or less) could elect to apply these changes retroactively to 2022-2024 by amending those returns. Under IRS Rev. Proc. 2025-28, that election had to be made by July 6, 2026. Any business can still elect to deduct its remaining unamortized 2022-2024 U.S. research costs in its first tax year beginning after 2024, or split them over that year and the next.

How ICS Can Help

  • Documentation and calculation

    ICS Tax can prepare all necessary documentation to support the credit, calculate the amount of the credit, and draft necessary compliance.

  • Audit support

    In the event of an IRS audit, we can help support your credit.

  • Advance loans

    Businesses may qualify for advance loans based on their anticipated research tax credit, with financing amounts from $5,000 to $500,000 and interest rates generally ranging from 15% to 28%.

Request a free benefit estimate

A Valuable Tax Credit that Fosters Innovation

Request a benefit estimate

Tell us about the property, project, or activity. A specialist will follow up with a free benefit estimate.

Related Strategies

Tax deduction

Comprehensive Fixed Asset Review

The technical interviews and plant records behind a credit study also show where equipment sits in the wrong asset class.

State tax exemption

Utility Sales Tax Exemption

A facility running qualifying process activity is usually metered for it, which is what a predominant-use study measures.

Export incentive

IC-DISC

A company developing the products it then exports can pair the credit with a federal export structure.

Nationwide locations
  • AL. Montgomery
  • CA. Laguna Hills
  • CA. Los Angeles
  • CO. Denver
  • FL. Oakland
  • LA. Prairieville
  • MN. Savage
  • NY. Conesus
  • NY. East Windsor
  • OH. Beachwood
  • OH. Columbus
  • PA. Pittsburgh
  • SC. Columbia
  • TN. Knoxville
  • TX. Houston
  • VA. Fredericksburg
  • WA. Vancouver
  • WV. Morgantown
© 2026 ICS Tax, LLC | LinkedIn | Facebook | XPrivacy Policy