For many business owners in Arizona, keeping up with industry advancements and shifts requires a good amount of investment in research and development. Time, resources and wages spent on these projects can be costly and many companies don’t know that both the state and federal government rewards businesses who make these efforts.
If you own a business in Arizona you may be eligible for these tax credits and can earn dollar-for-dollar savings that you may have been missing out on.
How Do Arizona Companies Receive These Credits?
Any business in the state of Arizona performing research and development that is technological in nature, creates new or improved products, services or methods, eliminates any uncertainty, or involves a process of experimentation, can be considered for these credits. This also includes research funded by taxpayers at state universities.
In Arizona, there are both refundable and nonrefundable tax credits. To qualify for the refundable tax credits, a business must employ less than 150 full-time employees and also qualify for the standard R&D tax credits requirements based on the research and development they’ve performed.
The refundable amount is 75% of the excess of the allowable credit that exceeds the taxpayer’s tax liability. If any refund is elected, excess amounts are waived. This can be carried over for the next 15 years, however, the refund is capped at $5 million during any calendar year.
How Are These Credits Calculated in Arizona?
In the state of Arizona, your credits are calculated depending on the excess of your qualified research expenses.
If your business has an excess of $2.5 million or less the following applies:
- Taxable years through December 31, 2017 will receive credits equal to 20% of that amount
- Taxable years from December 31, 2017 to December 31, 2021 will receive credits equal to 24% of that amount
- Any taxable years from December 31, 2021 and after will receive credits equal to 20% of that amount
If your business has an excess over $2.5 million the following applies:
- Your tax credits are equal to $500,000 plus 11% of any amount that exceeds $2.5 million for taxable years through December 31, 2017
- Your tax credits are equal to $600,000 plus 15% of any amount that exceeds $2.5 million for taxable years after December 31, 2017 and through December 31, 2021
- For any taxable years from December 31, 2021 and after, your tax credits are equal to $500,000 plus 11% of any amount that exceeds $2.5 million
Claim Arizona’s R&D Tax Credits
For companies performing extensive research and development in Arizona, these tax credits can be a valuable tool for increasing your bottom line. If you are considering claiming your R&D tax credits, partner with our trusted team of tax experts. Call National Tax Group at 561-257-3436 to begin your free assessment.