Maryland offers innovative businesses an R&D tax credit of up to 10% of QRE.
Does Maryland Offer an R&D Tax Credit?
Small business owners in Maryland will be happy to learn that their home state offers an R&D tax credit program. Now, bear in mind that not every business will qualify for this program. According to the Maryland Department of Commerce, your business will need to meet guidelines set by § 41(b) of the Internal Revenue Code. It will also need to incur qualified research and development expenses (QRE) as defined by the state of Maryland.
Applicable businesses must:
- Be a for-profit corporation
- Be a limited liability company, partnership, or sole proprietorship
- Have net book value assets totaling, at the start or end of the taxable year which QRE are incurred, less than $5,000,000
How Much is the Maryland R&D Tax Credit?
The Maryland tax credit for R&D is quite generous. You could receive up to 10% of your QRE incurred during the taxable year above the Maryland Base Amount. Maryland’s total statutory cap is $12 million, and $3.5 million is designated for small businesses. Now, if your total credit is more than the statutory cap, your business’ R&D tax credit will be prorated. Bear in mind that you can’t receive more than $250,000 in the form of a credit.
It’s also important to note that Maryland R&D tax credits certified after December 15, 2012, and exceed the income tax liability for that taxable year are refundable for small businesses.
Is Applying for an R&D Tax Credit Easy?
Applying for this tax credit shouldn’t be task taken lightly. If you fail to fill out your application correctly, it could be denied even if your business meets all the state qualifications. Due to the complexities that are involved with this application, it’s in your best interest to work with an R&D tax credit expert. Such an individual can guide you through the application process and help you avoid any mistakes.
Here are a few key elements of applying for an R&D tax credit in Maryland:
- You must apply by November 15 of the following calendar year.
- You must submit documentation proving that you had net book value assets under $5 million at the beginning or end of the tax year.
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You must provide information on the R&D your business conducted.
While applying for an R&D credit takes a lot of effort, state R&D tax credits for farmers, engineers, and other qualifying applicants could result in a large credit, but if you qualify for a Maryland state tax credit, you could apply for a federal R&D tax credit too.
What is the Federal R&D Tax Credit Program?
Unlike many state R&D tax credit, the federal government’s R&D tax credit program is a permanent benefit for business owners. Below you’ll find some key features of the federal R&D tax credit:
- Business owners from any state can apply
- The federal R&D tax credit is a permanent part of the U.S. tax code
- R&D must be done within U.S. borders
As a business owner, you know how much work you have to put into a business to keep it going. If you live in Maryland, you can claim an R&D tax credit from your state and the federal government. You can reach out to an R&D tax credit expert to learn everything you need to know about the federal R&D tax credit program.
These resources can not only help you keep more money in your pocket but can also be used to attract investors and propel your business. Contact us at Bowers R&D today to get the credit you deserve.