Research & Development Credits

For businesses developing or improving products, processes, or software in the United States, the federal research & development tax credit is designed to reward that investment.

Who Benefits:

• Startups with W-2 payroll investing heavily in engineering or product.
• Growth-stage and mature companies improving software, manufacturing, or processes.
• Founders & pass-through owners (S-corps/partnerships/LLCs): with flow-through credits to reduce personal income tax, subject to individual limits.
• A wide range of industries—tech, manufacturing, life sciences, consumer, and more—where work aims to solve technical uncertainty through testing and iteration.

How it Helps:

• Payroll tax offset of up to $500,000: Eligible early-stage companies can use the credit to cut employer payroll taxes, creating immediate cash-flow relief.
• Dollar-for-dollar reduction of income tax: Profitable companies apply the credit directly against federal income taxes (a $100k credit lowers tax by $100k).
• Timing flexibility: If companies can’t use the full credit this year, unused amounts can carry forward to future years.
• State add-ons: Many states offer additional R&D credits that can stack with the federal benefit.

Planning to sell your company?

• Better cash-flow story: Lower cash taxes improve near-term metrics buyers watch.
• Potential deal value: Well-documented credits and carryforwards can be an asset in negotiations (actual use depends on deal terms and structure).
• Diligence-ready: Clear support for R&D activities reduces friction and protects value at closing.