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Why R&D Tax Credits are Beneficial

The Research and Development Tax Credit or the R&D Tax Credit was made by congress in the year 1981 as a part of the Economic Recovery Tax Act that helps companies in staying competitive in the international market. This kind of credit was made permanent officially in January 1, 2016. However, there are only few small to mid-sized companies that are taking its full advantage because of the misrepresentation of it on credit laws and also because of the lack of information.

Below are some of the reasons why getting R&D Tax Credit is beneficial:

Increasing the Bottom Line of your Company

This kind of tax credit can actually help reduce the state tax and federal liabilities of a company. Any company which is involved in the R&D can in fact get about 10 – 15{a82f01179429940c996270e41ad11c5aa2cfd080a54890f74ac390dde083491a} or more of the ROI for their qualifying business activities. The credits likewise are considered as an asset because it helps increase the market value of the company and strengthening it as an acquisition target. The money will be saved and will likewise be invested to a new R&D project that is able to help on generating cash flow as well as help the company to grow for their future operations. Such kind of tax credit in fact is an offset against tax liabilities and this could be carried for up to 20 years.

Motivates Innovation

Credit like these in fact are made available to firms that process, develops, improves, invents, designs and many others more. Companies like these are then rewarded for the improvements and is able to help generate high paying positions and company profits. Components like these will then be produced for a consistent innovation that is crucial to be able to remain competitive, which would be why the IRS wants to give your company an ROI.

IRS Helped to Broaden R&D

The IRS in fact helped to broaden the definition of R&D. The Qualified Research Activity (QRA) have an activity which falls in the IRS Four Part Test. This kind of test requires a new or an improved business component where it should be technological in nature, eliminates uncertainty and the process of experimentation.

Maintains your Competitiveness

Many states today are offering R&D tax incentive to help Federal Research and Development Tax Credit. Any company could take advantage of such credit and be able to claim upwards in R&D Tax Credits, which makes it one of the biggest tax credits that are available. An incentive like this will allow companies in producing innovative technology which will allow a country to remain competitive in the globalized economy we have now.

5 Takeaways That I Learned About Taxes

5 Takeaways That I Learned About Taxes