The R&D tax credit for work you already do
The R&D tax credit is a permanent federal incentive that rewards U.S. companies for improving products, processes, software or formulas. It reduces the tax you owe directly, not just your taxable income, and our studies are documented to hold up if the IRS asks.
What is the R&D tax credit?
IRC Section 41 rewards U.S. companies for investing in innovation with a direct, dollar-for-dollar reduction in taxes owed. It has been a permanent part of the federal tax code since 2015.
The credit is calculated on qualifying research expenses above a base amount. Federal and most state credits can be claimed together, and unused credits carry forward for up to 20 years.
Work qualifies when it passes four tests
- Permitted purposeIt aims to improve the function, performance, reliability or quality of a product, process, formula, technique or system.
- Technological in natureIt relies on engineering, computer science, or the physical or life sciences.
- Elimination of uncertaintyAt the start, your team was not sure whether or how the approach would work.
- Process of experimentationYour team evaluated alternatives through testing, modeling, iteration or trial.
The credit does not require a breakthrough, and failed attempts count. Read the four-part test, with examples, in the guide
Which industries qualify for the R&D tax credit?
Any business whose team solves technical problems through experimentation. Most companies that qualify do not think of their daily work as R&D.
Not on the list? See the full eligibility table by industry
What is the R&D credit worth to you?
Answer the quick check questions to see if your company qualifies.
Want the full picture? See each tax year, what counts toward the credit, and your state. Open the R&D Tax Credit Calculator
Most pass-through entities (S-Corps, partnerships, LLCs) see the full credit benefit at individual rates. Nearly 40 states stack additional credits on top of the federal credit. The federal number is the floor.
Claiming the credit also reduces your research deduction by the same amount, or the credit can be taken at a reduced amount instead, so the net gain is less than the full credit.
What moves the number?
The estimate above uses wages only. These are the things that move a real study up or down.
- A credit, not a deduction. It cuts the tax you owe dollar for dollar, where a deduction only lowers taxable income.
- States add more. Nearly 40 states offer their own credit on top. Look up your state
- No income tax yet? Newer businesses under $5,000,000 in gross receipts can elect to apply up to $500,000 a year against payroll taxes.
- What counts. Wages for qualifying work, supplies used up in research, cloud computing for research, and 65% of contract research.
- Prior years count. Open refund years can add to the first year's value.
Estimate only, federal credit. Claiming the credit also reduces your research deduction by the same amount, or the credit can be taken at a reduced amount instead, so the net gain is less than the credit itself. How the credit is calculated
Why choose aecre for an R&D tax credit study?
Most R&D credit providers are tax professionals who subcontract the engineering work. aecre is built the other way: engineering-trained partners who document how technical problems actually get solved.
| Topic | Big Four and national firms | aecre |
|---|---|---|
| Who does the work | Junior associates with senior review. Partner time is limited. | Partners handle every engagement. You are never routed to junior analysts. |
| Documentation | Variable. Often junior-led with partner review at the end. | Engineering-led technical narratives built to IRS examination standards. |
| Audit risk | Generally lower, though quality depends on who is assigned. | Built to withstand examination. Substantiation file retained on every study. |
| Industry depth | Broad but generalist. Deep technical knowledge varies. | Deep focus across technical industries. Built from engineering expertise, not tax templates. |
How does an R&D tax credit study work?
Four steps from first conversation to a package ready for your return. aecre handles the technical documentation, and your CPA files the return. Your part is giving us access to the people who do the work.
Discovery and scoping
You share how your team works. We deliver a preliminary credit estimate and qualification assessment, with no obligation.
Technical interviews
We talk with the people who do the hands-on problem solving and document qualifying activities and technical uncertainties.
Credit calculation
From payroll, expense and contractor records, we identify every qualifying expense, apply the stronger federal method and identify state credits.
Ready for your CPA
A complete package for the return, with audit-defense documentation and the substantiation file retained on every study.
Can I claim R&D credits for prior tax years?
Yes, for any year whose refund window is still open. For most companies that covers the three most recently filed years plus the current year, claimed on amended returns.
Partnerships under the federal partnership audit rules generally file an administrative adjustment request instead, and the partners take the change into account in a later year. For companies that have been doing qualifying work for years without claiming, the prior-year opportunity is often larger than the current year. aecre reviews every open year in every engagement.
R&D tax credit questions
Want more depth? The R&D Tax Credit, Explained covers qualifying expenses, payroll offsets, states and calculation methods.
Does my company qualify for R&D tax credits?
Probably more likely than you think. The credit is available across virtually every industry to companies that work on improving products, processes, techniques, recipes, or systems. The work does not need to be novel to the world. It only needs to be new to your company and to have required genuine experimentation. The best way to confirm is a 30-minute discovery call.
What is the Four-Part Test for qualified research?
The Four-Part Test is the IRS standard under IRC §41. All four criteria must be satisfied: (1) Permitted Purpose: improving functionality, performance, reliability, or quality. (2) Technological in Nature: relying on engineering, science, or technical disciplines. (3) Elimination of Uncertainty: resolving uncertainty about capability or design. (4) Process of Experimentation: evaluating alternatives through testing or systematic trial.
How much is the R&D tax credit worth?
The federal credit typically equals approximately 6% to 10% of annual qualifying research expenses. On $1,000,000 in qualifying spend, that is approximately $60,000 to $100,000 per year. Nearly 40 states offer additional credits that stack on top. aecre evaluates both federal methods and identifies all applicable state credits.
Can startups use R&D credits to offset payroll taxes?
Yes. Qualifying small businesses with less than $5,000,000 in gross receipts and no more than five years of revenue history can apply up to $500,000 per year in R&D credits directly against payroll (FICA) taxes. The election is made on Form 6765 and applied quarterly. The election is made on a timely filed original return, so it is usually not available for past years.
Can I claim R&D credits for work done in prior years?
Yes, for any year whose refund window is still open. You claim the credit for a prior year by filing an amended return within three years of the later of that return's original due date or the date you filed it. For most companies, that covers the three most recently filed years plus the current year. Partnerships under the federal partnership audit rules generally file an administrative adjustment request instead, and the partners take the change into account in a later year. aecre reviews every open year in every engagement.
What counts as a qualified research expense (QRE)?
QREs include: wages for employees who perform, manage, or support qualifying work; 65% of contractor costs; supplies and materials consumed in research; and cloud computing costs for computing time used directly in qualifying research.
I am a CPA. How does aecre work alongside my firm?
aecre works directly alongside your firm throughout every engagement. We handle all technical documentation and QRE identification. Our deliverable is a complete, CPA-ready package: documented qualifying activities, QRE calculations, Form 6765 preparation, and full audit-defense support. We do not displace CPAs. We bring the technical documentation capability that most CPA firms do not have in-house.
My accountant said we do not qualify. Should I get a second opinion?
It depends on how they reached that conclusion. Many generalist CPAs apply the Four-Part Test conservatively or are unfamiliar with how it applies outside traditional technology or manufacturing. The test is broader than most people expect. We have worked with clients whose prior advisors passed on the credit and identified significant qualifying activities. A 30-minute conversation will tell you.
Who will run my R&D study?
Both partners, on every engagement. No handoff to a junior team after the sale.
Taylor Beamer
Runs the technical side of every study, from the first interview to the final report.
Brandon Carroll
Your first call, and your point of contact from scoping through delivery.
Get your feasibility assessment
We assess your qualifying activities and estimate your federal and state credit, before you commit to anything. We respond within one business day.