Sustainable fashion is more than a trend. It’s a movement. As a designer or manufacturer focused on sustainability, you’re not just creating products that look good—you’re helping shape a better future for the planet.
While that innovation is exciting, it can also be expensive. The good news is that R&D tax credits are available to help offset those costs and support your continued growth. Keep reading to learn more about this credit, and how it can fuel your creative passions.
What Are R&D Tax Credits?
R&D (Research & Development) tax credits are federal and state incentives designed to reward businesses like yours for investing in innovation within the United States. Bloomberg Tax states that these credits are some of the most significant tax credits currently in place.
But each year, billions of dollars in credits go unclaimed—often by companies that qualify but don’t realize it.
These credits keep you from paying too much come tax time. If your business is under five years old and generates less than $5 million in annual revenue, you could apply the credit toward your payroll taxes. More established businesses can use the credit to offset income tax.
Do You Qualify as an Eco-Friendly Fashion Company?
If you’re developing sustainable fabrics, improving manufacturing processes, or creating environmentally responsible designs, there’s a strong chance you qualify.
To determine eligibility, consider whether your work meets the following criteria:
- Are you developing new products or improving existing ones?
- Do you encounter technical uncertainties during development?
- Are you using experimentation—such as prototyping, testing, or trial and error—to solve challenges?
- Does your work rely on engineering, science, or technical principles?
- Is your development work performed in the United States?
If you answered “yes” to these questions, you may be eligible for a federal R&D tax credit.
What About State R&D Tax Credits?
In addition to federal incentives, many states offer their own R&D tax credit programs.
While these often follow similar guidelines, each state has unique rules and benefits. Depending on where you operate, you could unlock even greater savings—or in some cases, monetize your credits for additional cash flow.
How Much Could You Save?
Federal R&D tax credits typically range from 7–10% of your qualified research expenditures (QREs). These expenses may include:
- W-2 wages for employees involved in R&D
- Costs of supplies used in development
- Up to 65% of fees paid to U.S.-based contractors
When combined with state-level incentives, your total benefit could exceed 15% of your qualified expenses, making a meaningful impact on your bottom line.
Why It Matters
By taking advantage of R&D tax credits, you can reinvest savings back into your business—whether that’s developing new sustainable materials, improving production efficiency, or scaling your operations. It’s a smart way to fund innovation while reducing your tax burden.
Take the Next Step
If you’re in the sustainable fashion industry, you owe it to yourself to explore these valuable incentives. The process can be complex, but you don’t have to navigate it alone.
Contact the R&D tax credit specialist team at Bowers R&D Associates today to find out how much you could save and ensure you’re maximizing every opportunity available to your business.