How Architectural and Engineering Firms Can Qualify for R&D Tax Credits

engineering firm

Are you missing out on potential tax credits? While the technology, pharmaceutical, and manufacturing industries are thought of as the typical research and development (R&D) tax credit recipients, however, architectural and engineering firms can qualify, too. Through everyday activities where they continuously develop new and improved designs, concepts, and processes. The more qualifying activities you are participating in, the higher your tax credit amount could be.

What Types of Activities Qualify?

Some of the activities you are already performing on a day-to-day basis may be considered research and development activities already. Architectural and engineering firms regularly perform qualifying work without knowing it. This is especially true for most during the design or pre-construction stages. Some of these activities that qualify for credit include:

 

  • Creating alternative design concepts to meet complex requirements
  • Determining alternative structural designs
  • Creating energy-efficient designs or using energy-efficient materials
  • Achieving Leadership in Energy and Environmental Design (LEED) certification
  • Developing appropriate water flow or plumbing systems or determining ventilation for a structure
  • Design-build construction
  • Developing electricity conduction systems
  • Developing or using computer-aided design (CAD) modeling and testing to assess designs
  • Creating optimal designs for lighting or acoustical qualities

What Types of Activities Do Not Qualify?

Although many activities do qualify for the R&D credit, it can have some stipulations that you need to be aware of. The credit doesn’t apply to:

 

  • Funded research
  • Research performed after a design is commercially produced
  • Contracts that guarantee payment for 100% of time and materials
  • Duplication of existing components

 

How you get paid is just as important as what activities you’re performing. Typically, firms that take on what could be considered riskier projects have more qualifying activities carried out in concept design, schematic design, design development, and value engineering phases and therefore receive higher R&D tax credits. 

Can You Take the Credit in Previous Tax Years?

Yes, if your firm has not claimed the R&D tax credit for the past three tax years, you can claim the credit. This is assuming that you have performed qualifying activities during each of those years. 

Are There State R&D Tax Credits?

Yes, there are many different states that offer the R&D tax credit. However, each state has its own set of rules and regulations that come along with the tax credit. For example, the Maryland R&D tax credit will be different than the Kansas R&D tax credits. Additionally, when you claim the R&D tax credit at the federal level it does not reduce the amount you can receive at the state level. This means your tax credits are enhanced by claiming credits at both levels, if applicable to your state.

Working With a Specialist in R&D Tax Credits

If you think that your company may qualify for research and development or other tax credits, we would love to consult with you. Our team of tax experts at the National Tax Group can help you receive them. 

 

We have assisted many companies across many different industries in obtaining these credits by creating and providing the needed documentation while walking through all your company’s activities. Contact us to set up your free assessment with our tax specialists today.

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