Contractors can grow their businesses by helping clients access R&D (research and development) tax credits.
Businesses in nearly every industry will rely on contractors at one time or another. Pharmaceutical and cosmetic companies often employ external labs to assist in product development. If your lab is often contracted, you can use R&D credits to stand apart from the competition. Keep reading to learn how these credits can help you grow your business.
Can Contractors Apply for R&D Credits?
R&D tax credits are for businesses that spend money to create a new product or process for financial gain. If you own an independent lab that develops chemicals, beauty creams, or other products for different companies, you can’t apply for the credit. Although, you can still use R&D tax credits to your advantage. Let’s examine how R&D tax credits work, so you can leverage these tools to propel your company forward.
An Introduction to R&D Credits
R&D credits incentivize businesses to spend more money on R&D. At the federal level, a qualifying business can receive a credit that will match 7-10% of these total expenses:
- The salaries of U.S.-based employees conducting R&D
- A percentage of 3rd party U.S.-based contractor fees hired for R&D
- The cost of disposable supplies purchased for R&D purposes
A federal R&D credit can offset the business’ payroll tax if it’s no more than five years old and is pre-revenue or making less than $5 million in revenue. A business’ income tax can be reduced if it’s making more than $5 million or is more than five years old. Many states also offer R&D credit programs with similar regulations. As a contractor looking to grow your business, it is important to know these facts.
How Can R&D Tax Credits Help a Contractor Gain Clients?
Let’s say that you are trying to convince a beauty company to hire your lab for product development and testing. The company is torn between your lab and Lab B. Your team has more experience, but Lab B is cheaper. To give yourself a leg up in the competition, you can inform the beauty company that with a federal R&D credit, 65% of your lab fees could be rolled into its total R&D credit calculation. In addition, if the beauty company is headquartered in a state with an R&D program, the company could receive an even larger credit overall.
You can even go a step further and offer to connect your prospective client with an R&D credit expert, making your lab all the more invaluable.
Connecting Clients with R&D Credits
Looking for an R&D tax credit professional to assist companies that need your services? Consider Bowers R&D. A boutique business, Bowers R&D offers a flexible payment schedule, access to state-of-the-art propriety software, and provides top-notch customer service from start to finish.
In Conclusion: Grow Your Business with R&D Tax Credits
Independent contractors that assist companies with product development can increase business growth by connecting their clients with R&D tax experts. Receiving a tax credit for spending on R&D empowers companies to spend more on R&D with you. Don’t wait to grow your business with R&D credits. Contact us today to inquire about the Bowers R&D referral program.