Both the U.S. Treasury and the Indiana Department of Revenue give millions of dollars to qualifying businesses practicing research and development activities. Is your company cashing in?
While more and more companies are becoming familiar with the lucrative federal R&D tax credit program, many businesses are still unaware that many states also govern their own R&D programs, saving them an additional amount on their corporate taxes.
Indiana has been one of the most research and development-friendly states, with its own incentives. This is great news for Indiana state businesses who are dedicating resources to innovation.
The current version of the Indiana state R&D tax credit works as follows:
- It allows a 15% credit on R&D investments increase over the base amount of $1 million. For example, a company that invests $100,000 in 2018 and $200,000 in 2019, they could receive a $15,000 credit on the $100,000 difference.
- In cases where the difference in these two numbers is over the $1 million mark, companies can still apply for the R&D tax credit, but at a rate of 10 percent versus 15 percent.
- If there are no previous research and development investments the previous year, the amount of the R&D tax credit the business can receive is five percent of the research investment expenses.
Once a business’s activities are deemed as qualifying, expenses can equal significant tax savings for the company. Additionally, employee wages and research expenses to an accredited entity such as a university can be sources of research and development tax credits. Indiana also allows a 10-year carryforward period for any unused R&D tax credits.
Through the federal R&D program, established companies can receive a dollar for dollar return of 10-15 percent of their research and development investments. Startup companies or small businesses that aren’t yet revenue-generating can also benefit from R&D by taking advantage of its payroll tax provision.
However companies qualify, all businesses must claim R&D tax credits in a manner that will withstand audit by the Indiana Department of Revenue as well as the IRS. At National Tax Group, we can itemize and capture credits for your company in time for the extended 2019 tax season. Call our business tax experts at (561) 257-3436 to schedule your free initial assessment and determine your eligibility.