Companies can realize thousands of dollars in research tax credits

Companies can realize thousands of dollars in research tax credits

As tax assessments pile up, companies continue to look for ways to get a tax credit. Two such major tax benefit tools are the Research Tax Credit and the 179D Energy Efficiency Tax Credit. The first aspect concerns tax incentives to encourage companies to invest in business research and development within the US. 179D tax credits, on the other hand, help companies see the payoff in reducing energy use. In reality, companies, except large ones, rarely consider these aspects of tax relief.

  • Stimulus for research

The concept of a tax credit based on research and development investment began in the early 1980s, and since then the credit has gone through fourteen extensions, with the current system expiring in December 2013. The most recent extension of the credit system was by passing of the American Taxpayer Relief Act (ATRA) of 2012. Because this is a largely unknown tax credit, many businesses, large or small, fail to take advantage of it.

  • Anyone can apply

Many businesses are of the opinion that they can only apply for research tax credit when they invest in research to develop something new through a recognized research organisation. Although this fact is largely true, it is still not an absolute fact. Businesses that can show documented evidence of investing in research to improve existing products and not always through a laboratory setting can successfully apply for this credit. Even small businesses can also apply when they can show evidence of collecting customer interaction data and investing in the analysis of that data.

From manual “fill-in-the-form” research to online business research using various analytics CRM systems, all are eligible for this tax break. This also applies to state laws, as 38 states currently include a research tax credit, and many more states are considering implementing this policy to encourage businesses to operate with greater scientific accuracy. Companies applying their research findings through smart branding and neuromarketing should also consult with tax experts to assess their requirements.

  • Tax benefits of adopting energy efficiency

Likewise, the 179D tax deduction for energy efficiency can also be a potential source of tax relief. These deductions work under the statutory provisions of the Emergency Economic Stabilization Act of 2008. To qualify, companies must make significant reductions (50%) in energy costs for HVAC, building envelopes and indoor lighting by beginning January 2006. The current deduction rate is $1.8 per square foot for those who qualify.

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