Many startup businesses are able to generate a cash benefit from the federal Research and Development Tax Credit (R&D Tax Credit). For more than 10 years, the R&D Tax Credit has been a permanent tax incentive, and qualified small businesses may use up to $500,000 of their R&D Tax Credit each year to offset employer payroll tax liabilities.

Legislation enacted in 2022 expanded this benefit by doubling the maximum payroll offset from $250,000 to $500,000 for tax years beginning on or after January 1, 2023. Under these rules, taxpayers may apply the credit first against Social Security (FICA) taxes (up to $250,000), with any remaining amount applied against employer Medicare tax liabilities.

Download Whitepaper