The manufacturing industry powers the world, but taking on such work is a costly enterprise. Thankfully, tax credits for manufacturing keep these important businesses running. Keep reading to learn more about tax credits that can benefit your manufacturing business.
What are the Tax Credits for Manufacturing Companies?
One credit that is specifically designed for this industry is The Advanced Manufacturing Investment Credit which promotes the manufacture of semiconductors and semiconductor manufacturing equipment. In regards to how much this credit is worth The IRS states:
The advanced manufacturing investment credit for any taxable year is generally equal to 25% of an eligible taxpayer’s qualified investment in an advanced manufacturing facility.
Manufacturing companies can also take advantage of other tax credits that include:
- Work Opportunity Tax Credit
- Employer Credit for Paid Family and Medical Leave
- Indian Employment Credit
- Research and Develop (R&D) Tax Credit
Some of the credits listed above reward companies for hiring certain types of employees, but the R&D tax credit offers monetary rewards for work that has already been done.
Manufacturing Activities that Qualify
Many manufacturers perform activities that qualify for the R&D tax credit without realizing it. Some examples of activities that often qualify include:
- Improving product quality
- Development of second generation products
- Product development using computer-aided design tools
- Tooling and equipment fixture design and development
- Optimizing manufacturing processes
- Designing manufacturing equipment
- Designing, constructing, and testing prototypes
- Designing and developing cost-effective operational processes
- Alternative material testing
- Evaluating and determining the most efficient flow of material
- Increasing manufacturing capabilities and production capacities
- Achieving compliance with changing emission regulations
As you can see, there are many manufacturing activities that are classified as qualified research expenditures (QRE).
How Much is the R&D Tax Credit Worth?
The R&D tax credit offered at the Federal level is worth 7-10% of your QRE. Now, if you live in a state that provides an R&D tax credit, you could receive that as well.
Typically, with both a state and Federal R&D tax credit in had, you could recoup 12-15% of your QRE. Bear in mind that every state’s program is unique and offers different amounts for the credit, so reach out to an R&D tax credit specialist to learn more about your state’s program.
In the meantime, you can use this free R&D tax credit calculator to discover how much your Federal R&D tax credit could be.
Tax Credits for Manufacturing: What You Need to Know
Manufacturers play a vital role in our worldwide economy, but they take on immense financial burdens to do so. Tax credits for manufacturing help alleviate that burden.
While there are a variety of tax credits manufacturers can utilize, taking advantage of a Federal and state R&D tax credit is immensely beneficial.
Don’t wait to find out more about these incredible tools. Contact our Research and Development Tax Credit Team today to learn what your credit could be worth.