Innovative Kentucky businesses can take advantage of a federal and state research and development (R&D) tax credit. These credits directly reduce a business’ tax burden.
The horses of the Kentucky Derby aren’t the only things racing forward in the Bluegrass State. Inspired Kentucky companies are speeding through new product developments every day. Just like racehorses, these intrepid companies need resources to be able to perform at a competitive level. Want to learn more about Kentucky R&D tax credits for entrepreneurs? This article will share everything you need to know about the federal R&D tax credit program and more.
Does Kentucky have an R&D Tax Credit?
Yes, innovative Kentucky companies can take advantage of R&D tax credits at both the state and federal level. R&D credits reward businesses that take a financial risk in order to create a new product or dramatically improve upon a process. Innovation can occur in a wide variety of industries like cosmetics, biotech, or breweries to name a few. If your business work to create new products in the United States, you could be eligible for an R&D tax credit.
Let’s take a closer look at these credits and learn how these resources can empower your business to keep making great discoveries.
Kentucky R&D Tax Credits
While not every state has an R&D tax credit program, Kentucky business owners are lucky. They can receive a credit from their state for their R&D activities. Here’s what you need to know about the Kentucky R&D tax credit:
- The Kentucky state R&D tax credit is a nonrefundable income tax credit.
- The credit amount equals 5% of the qualified cost for “construction of research facilities” for “qualified research” as defined in Internal Revenue Code Section 41.
- “Construction of research facilities” means constructing, remodeling, and equipping facilities in Kentucky or expanding existing facilities in Kentucky for qualified research.
- Any unused credit may be carried forward for 10 years.
Now, entrepreneurs in the Bluegrass State must be aware that they could potentially receive a tax credit from the federal government as well. Let’s examine the federal R&D credit now.
What is the Federal R&D Tax Credit?
While some features of the federal R&D tax credit are similar to the Kentucky state credit, there are key differences. Here some important facts about the federal R&D credit:
- Interested applicants must pass a 4-part test to establish eligibility.
- The federal R&D tax credit can be 7-10% of a business’ qualifying R&D expenses
- Depending on certain criteria, business owners can reduce their payroll tax or their income tax with the credit.
- The credit can carry forward 20 years.
As mentioned above, while the Kentucky and federal credit are similar, both have idiosyncrasies. It’s not in your best interests to go it alone when applying for these credits. You should contact a tax credit expert to learn how to apply for a federal R&D tax credit and state credit properly.
Why Should Companies Utilize R&D Tax Credit Experts?
A winning racehorse has an entire team working to ensure its success. The owner, manager, jockey, and trainers all work together to take home the gold. Your business deserves the the same dedication, and a tax credit expert can enable you to win the tax credits you deserve. No two tax credit programs are exactly alike, so you need someone who can help you navigate the process. With a tax credit expert on your team, you can rest assured that your business will be able to maximize your R&D credit.
In Conclusion: Kentucky R&D Tax Credits
Kentucky companies can utilize both a state and federal R&D tax credit. A tax credit expert can help you take advantage of these great resources. These credits directly reduce a company’s tax burden and allow company owners to use newly liberated funds for exciting ventures. Contact us at Bowers R&D today to get the credit you deserve.