Dog food manufacturers could reduce their tax burden by 10% with a federal research and development (R&D) tax credit.
Our four-legged friends stick with us through good times and bad, so it’s only fair to feed them the best food available. Unfortunately, spending time and money to design the most nutritious kibble can be draining for a dog food company. However, if your company is working to create the healthiest dog food, you could get an R&D tax credit. These credits are an important resource, and it’s essential that dog food manufacturers know how to apply for a federal R&D tax credit.
What is an R&D Tаx Credit?
R&D tax credits were first introduced on a national scale in 1981. These credits incentivized companies to bring more skilled labor to the United States and fuel the economy through innovation. With these credits, dog food manufacturers can reduce their tax burdens by as much as 10%. Here are some more significant facts about the federal R&D tax credit:
- Qualifying start-ups can use it to reduce payroll tax
- Qualifying companies can use it to offset the business income tax
- Companies can carry the credit forward 20 years
Some states offer their own version of an R&D tax credit. For example, there are R&D tax credits in California, Pennsylvania, and other states that allow local entrepreneurs to maximize their business’ potential. Living in a state that has such a program means that you can get a federal and state R&D tax credit simultaneously. You may even be able to sell your state credit for profit.
How Long Does it Take to Get an R&D Credit?
The application process for a federal R&D tax can be daunting, but once it’s over, you can put your federal R&D credit to immediate use. Of course, it’s best practice to work with an R&D tax credit expert. With a professional at your side, you can rest assured that your R&D has been properly processed, and that you’re getting every penny you deserve.
Before you begin your R&D study, you must confirm that your business has:
- Developed a new product or process or improved upon existing functionality
- Dealt with some form of uncertainty in the development process
- Utilized a process of experimentation to eliminate uncertainty
- Conducted experimentation that relied on engineering, biological, physical, or computer science
- Employed all or a portion of your workers within the United States
R&D Tax Credit Calculation
When applying for an R&D tax credit for dog food manufacturers, you’ll need to compile a list of your qualified research expenditures (QREs). This can include the:
- Salaries of U.S.-based employees conducting R&D
- Cost of U.S.-based 3rd party contractors
- Cost of disposable supplies purchased for R&D
Remember that this credit was designed to boost the U.S. economy; R&D work done by employees or contractors outside of the US will not be eligible for your calculation. Use a free R&D tax credit calculator to get an estimate of your credit for your U.S.-based R&D expenses. With this extra money in your pocket, you could re-invest in your company to make it one of the best dog food manufacturers on the market.
In Review: R&D Tax Credits for Dog Food Manufacturers
Dog food manufacturers can receive a reward for trying to design the best dog food. Federal and state R&D tax credits can reduce your business’ tax burden immensely. Taking part in an R&D study can help you maximize your total credit, so don’t wait to get started. Contact us at Bowers R&D to begin your R&D study today.