The Benefits of the R&D Tax Credit for Manufacturing
R&D is crucial to the manufacturing industry. Without it, our products would never get better. Our tools would never become more efficient. Our environments would never become safer.
Those alone are reasons enough to invest more time and resources into R&D. But just in case you needed some extra incentive, there’s some serious tax breaks available.
When some people hear R&D, they think of scientists in lab coats testing chemicals and writing calculations. While that certainly can be the case, the Tax Credit extends well beyond that for manufacturing. Think of it more as “applied sciences”. It doesn’t even have to involve building a brand new product.
It can be as simple as trying to make a better, cheaper, cleaner, and/or faster version of a current product/material. It’s about improving what’s already there.
Or improving the way you make it.
Ultimately, it allows for experimenting, testing, and reengineering so that manufacturers can improve their industries. The R&D Tax Credit can even cover expenses such as legal fees and patent registrations It doesn’t, however, cover areas such as advertising, consumer surveys, and quality control testing.
As far as limitations go, that’s about it thanks to some very recent changes to the R&D Tax Credit setup.
One major change to the R&D Tax Credit is the status of permanency. Until now, the tax credit had been on a year to year basis, with an ever lingering possibility that it could disappear the next year. As we all know, great innovations don’t happen overnight and can take years to get right.
Now, you won’t have to worry about the tax credit going anywhere, and you can plan ahead accordingly.
While the R&D Tax credit has been great for larger sized businesses, small to medium size businesses have been limited in using it because of how they’re structured. Most small to medium businesses are structured as sole proprietorship, partnerships, or LLCs, which are pass-through entities.
Because of that, the owners would still be held liable for expenses that would otherwise be covered by the R&D Tax Credit.
Thankfully, this has finally been changed, allowing small and medium businesses to harness the full advantages of the tax credit for research and development. This will hopefully mean some huge advancements for the private sector.
There’s Never Been a Better Time to Innovate
With the new changes of the R&D Tax Credit, there’s really no reason for manufacturers to hold back from advancement. Of course, it’s a good idea to meet with your CPA to discuss the full benefits available to you.
Taxes are, after all, only slightly less complex than the human brain.
And when you’re building and innovating these new R&D projects, don’t forget to contact Ever-Roll for all of your wire rings, welded rings, and tube bending production needs.
bent on perfection.
bent on perfection.