You’re Probably Missing Out on One of the Most Valuable Tax Credits in the U.S.
Most business owners don’t realize it—but the Research & Development (R&D) Tax Credit isn’t just for labs, startups, or Silicon Valley. It’s for any business investing in innovation, from software to custom manufacturing processes.
If your team is solving problems, developing better ways to serve your clients, or building new tools—you might already qualify.
At Gulla CPA, we help you unlock these overlooked savings by identifying the work you’re already doing that fits the criteria. Here’s what every business owner should know:
What Is the R&D Tax Credit?
The R&D Tax Credit is a federal (and in many cases, state-level) incentive created to reward U.S. businesses for investing in innovation. Originally enacted in 1981 and made permanent in 2015, this credit helps reduce income or payroll tax liabilities for qualifying businesses.
Who Qualifies for the R&D Tax Credit?
You don’t have to be a high-tech giant to claim this. If your company develops or improves:
- Products
- Processes
- Techniques
- Software
- Formulas
…you may be eligible.
Industries that often qualify include:
- Manufacturing
- Engineering
- Architecture
- Software Development
- Construction
- Food & Beverage
- Agriculture
- Biotechnology
What Activities Qualify?
The IRS uses a Four-Part Test to determine whether your activities count:
- Permitted Purpose
- Must aim to improve functionality, performance, or quality of a product or process
- Technological in Nature
- Must rely on principles of science, engineering, or computer science
- Elimination of Uncertainty
- Must address uncertainty around capability, method, or design
- Process of Experimentation
- Must involve prototyping, simulations, modeling, or trial and error
Real-World Examples:
- 3D modeling and prototyping
- Developing or enhancing internal software
- Automating manual workflows
- Designing custom components
- Testing new formulas, technologies, or materials
Eligible R&D Expenses
You can claim the following types of costs as part of your R&D tax credit:
- Wages of employees directly involved or supporting R&D
- Supplies used and consumed during research
- Third-party contract research (subject to a 65% limit)
- Cloud computing or hosting for software development
How Much Can You Save?
- The federal credit typically equals 6% to 8% of qualified R&D expenses
- Startups with no income tax liability can offset up to $500,000 in payroll taxes annually
- Many states offer additional credits, stacking the savings
How to Claim the Credit
Here’s your roadmap:
- Identify Eligible Activities
- Work with a CPA or R&D tax specialist
- Document Everything
- Keep records of payroll, time tracking, testing, and development
- File IRS Form 6765
- Attach this to your federal income tax return
- Submit State Forms
- If applicable, follow your state’s credit application process
Common Misconceptions
❌ “We didn’t invent anything.”
✅ You don’t need to invent something new. Enhancing existing processes qualifies.
❌ “We’re too small.”
✅ Some of the biggest beneficiaries are startups and small businesses.
❌ “We outsourced R&D.”
✅ Third-party contractor research can still qualify.
Why It Matters
This isn’t just about a one-time tax break. The R&D credit creates cash flow, funds reinvestment, and fuels growth. Yet, many companies miss it because their accountant doesn’t have the time or resources to explore it fully.
At Gulla CPA, we specialize in finding credits that work for your business model—not just checking boxes during tax season.
Take the Next Step
Are you leaving money on the table?
We’ll help you determine if your projects qualify and walk you through the process—from eligibility to documentation to filing. Let’s unlock the R&D credit your business deserves.
📩 Schedule a call with a Gulla CPA advisor today.
