Companies who are focusing on advancing health products, fitness services or providing healthier alternatives can qualify for tax credits for their efforts
The health and fitness industry has seen a large increase in the last couple of years, especially with concerns centering around the current pandemic, and more people are becoming aware of the overall connection between their health and fitness. In fact, the human nutrition market is experiencing an increase in annual growth rate from 4.5% to 8.4% in 2020 and it is currently estimated to be a $35 billion dollar industry.
In order to keep up with the high demand for better fitness and health products, technology, services and more, companies must do extensive research. This type of research and development can qualify companies for important tax credits that should be taken advantage of.
What are R&D Tax Credits?
Created in 1981, the Research and Development Tax Credits are dollar-for-dollar tax credits that are given to businesses who take innovative risks within their industry that improve products, processes or software. Originally introduced as a part of the Economic Recovery Act of 1981, these credits are meant to stimulate the economy by incentivizing companies to invest in continual growth.
In order to qualify for these credits, businesses have to pass what is known as the “4-Part Test.” This test states that research and development must meet one of the following four requirements to be considered for these credits:
- Improves the quality, function, or reliability of a process or product
- Must resolve or remove uncertainty in a product or process
- There has to be a systematic process to the research or development such as logical trial and error, assessing alternatives, and refining hypotheses
- All research done is technological in nature
What Activities Would Apply For The Health and Fitness Industry?
There are multiple types of businesses, products and services within the health and fitness industry. When looking at whether or not your company applies for these benefits, it’s important to note that any type of business can receive these benefits as long as they meet the requirements. Here are a few common examples of developments health and fitness companies have been applying that would qualify for these credits:
- Changing recipes or adding or removing ingredients that improves the overall quality of food
- Implementing organic and all-natural ingredients and foods
- Advancements to weight-loss programs
- Developing supplements, amino acids, probiotics, gluten-free and vegan alternatives, dietary fibre, natural sweeteners, vitamins, and herbal extracts
- Online diet plans or programming that allow for more accessibility
- Improving food preparation such as the way fruits, vegetables and other plants are grown, removing sugars and salts, etc.
- Enhancing food trucks and food delivery processes such as developing new software so customers can track the live location of their products
- Developing apps that give people personalized nutrition or exercise plans
These R&D tax credits can be used to help offset the cost of developing these products or services. This includes things such as the staff needed to help with the developments, materials used, third-party contractors or freelancers, and any software used.
How Can I Claim These Credits?
In order to claim these credits, all the necessary paperwork and information must be in order to determine if your company’s activities actually qualify for R&D credits. This process can be complex and involve reviewing the processes that were in place during development.
Hiring a team of tax specialists to help can save your business time, money and resources. At National Tax Group, we have helped many companies that span across several industries to get the most from their R&D tax credits. Call us at (561) 257-3436 for your free assessment and we will go over what activities may apply and discuss next steps so you can receive these dollar-for-dollar credits.