IRC References
§41 Research Credit • §41(c)(4) Alternative Simplified Credit • §41(h) Payroll Tax Election • Reg. 1.41-4 Qualified Research
Do You Qualify for the R&D Tax Credit?
The Research & Development Tax Credit rewards businesses that invest in innovation—even if you don't think of yourself as doing "R&D." Many S-Corp owners in software, engineering, manufacturing, and professional services qualify without realizing it.
6-8%
Federal Credit Rate
$500k
Payroll Tax Offset (Startups)
20 Years
Carryforward Period
The Four-Part Test
All four tests must be met for an activity to qualify. Answer each question below.
1. Business Component Test
1
Is the research related to a new or improved business component (product, process, software, technique, formula, or invention)?
Examples of Qualifying Activities
- Developing new software features or applications
- Designing new products or improving existing ones
- Creating new manufacturing processes
- Building custom integrations or APIs
- Engineering prototypes or proof-of-concepts
2. Technological in Nature Test
2
Does the research rely on principles of physical science, biological science, engineering, or computer science?
Qualifying Technical Disciplines
- Software development and programming
- Mechanical, electrical, or civil engineering
- Chemistry, physics, or materials science
- Biotechnology and life sciences
- Architecture and structural engineering
3. Elimination of Uncertainty Test
3
Is the research intended to eliminate uncertainty about the capability, method, or design of the component?
Types of Uncertainty
- Capability: Can we achieve the desired result?
- Method: What's the best approach to achieve it?
- Design: What should the final design look like?
- Trial and error, testing, and iteration all count
- Uncertainty about cost or time does NOT qualify
4. Process of Experimentation Test
4
Does the research involve a process of experimentation to evaluate alternatives?
What Counts as Experimentation
- Systematic trial and error
- Testing multiple design approaches
- Modeling and simulation
- Prototyping and iterating based on results
- A/B testing for technical performance (not marketing)
You Likely Qualify!
Based on your answers, your business activities appear to meet the four-part test for R&D tax credits.
Estimate Your R&D Tax Credit
Enter your Qualified Research Expenses (QREs) to calculate your potential credit
W-2 wages for employees performing R&D (including owners)
Materials consumed in R&D (not equipment)
Payments to contractors for R&D (65% qualifies)
Leave blank if startup or first-time claim
🚀 Startup Payroll Tax Election
Qualified small businesses (under $5M gross receipts, less than 5 years old) can apply up to $500,000 of the R&D credit against payroll taxes (FICA) instead of income tax.
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Ready to Claim Your R&D Tax Credit?
We'll conduct a detailed study of your qualifying activities and maximize your credit.
Schedule R&D Consultation