Oregon business owners can take advantage of the federal research and development (R&D) tax credit program.
Oregon is a beautiful state that houses the majestic Mt. Hood, the setting of the cult favorite show Portlandia, and business owners who are coming up with new, exciting ideas every day. Researching and developing a new product can be expensive though, so what can Oregon residents do to fund their passions? Thankfully, Oregon business owners can take claim an R&D tax credit to power their dreams.
Does Oregon Offer a Tax Credit Program for R&D?
While there are research and development incentives in California, unfortunately the state of Oregon doesn’t copy its close neighbor in that regard. Oregon currently doesn’t provide its residents with an R&D tax credit like its . Now, there’s no need to worry if you run a business in Oregon, you still have resources at your disposal.
While Oregon may not offer an R&D state tax credit, inventive Oregon business owners can still get the credit they deserve through the federal R&D tax credit program.
The federal tax credit began in 1981 as a temporary program, but due its popularity, it was signed into permanent existence in 2015. This program is designed to help companies reduce tax burdens and fuel innovation.
Does My Business Qualify for a Federal R&D Tax Credit?
Do you qualify for an R&D tax credit from the federal government? Take this easy quiz to find out:
- Did you develop a new product or process or improve upon an existing functionality?
- Did you deal with some form of uncertainty in the development process (appropriateness of design, method used, etc.)?
- Did you utilize a process of experimentation to eliminate uncertainty (modeling, prototyping, trial and error or other testing)?
- Did you conduct experimentation which relied on engineering, biological, physical or computer science?
- Do you employ all or a portion of your workers within the United States?
If you answered ‘yes’ to these questions, then you could be a great candidate for the federal R&D tax credit. The next step in the process is to determine which of your business’ activities can count in your credit calculation.
What is Eligible for R&D Tax Credits?
Since applicants can expect to receive 7-10% of their qualified research expenditures (QRE), it’s imperative that you know what counts as such. Your business’ QRE’s can include:
- The salaries of company workers dedicated to or helping with R&D
- The cost of disposable supplies used in R&D
- The fees of 3rd party U.S. based contractors
You can use a free R&D tax credit calculator to get an estimate of just much your credit could be. With your tax credit in hand, you can reduce your company’s tax burden and keep more money in your pocket.
Can Business Owners Sell Their R&D Tax Credit?
Unlike some other types of tax credits, you can’t sell your federal tax credit for a profit. This credit can only be used to reduce your tax burden.
Now, if your company is under five years old and hasn’t yet started to build a revenue stream, the tax credit can be applied to your payroll tax. If your company has started to turn a profit, you can use the credit to reduce the business income tax burden. It’s also important to note that you can carry this tax credit forward 20 years.
When Can Business Owners Apply for the R&D Tax Credit?
When you apply for the federal R&D tax credit, you’ll need to fill out Form 6765 as dictated by the IRS. You can submit it when you file your business taxes. Now, applying for this credit isn’t as simple as filling out a sheet of paper. To avoid any IRS headaches, it’s in your best interest to work with professional who can help you put together an audit-proof R&D study.
Be prepared to answer questions about how your product was developed, how much you pay the individuals who participate in R&D, the names of other companies you may own, and more.
Oregon R&D Tax Credits: What You Need to Know
Although you can’t get a state R&D tax credit in Oregon, you can utilize the federal R&D tax credit. This credit allows you to get as much as 10% of your QRE back to you in the from of a credit. This credit allows you to lower your tax burden. Since so much background information is needed to compile an R&D study, be sure to contact Bowers R&D today to get started.