Businesses in the state of New Mexico who are innovating within their business or take part in research and development to improve can claim beneficial tax credits. These tax credits are given to businesses by both state and federal governments in order to promote more innovation within industries all across America.
If you’re a business owner located in New Mexico who partakes in the inventive and sometimes risky process of research and development, you can claim lucrative dollar-for-dollar tax credits. These tax credits can help you offset the investment it took you to perform these activities so you can keep performing them in the future.
How Do I Know What Processes Are Research and Development?
The research and development tax credit is one of the most overlooked tax credits for businesses. Although most businesses do qualify for this credit, only ⅓ of companies actually utilize the credit causing many companies to miss out on money they are entitled to.
Because qualifying activities can be day-to-day tasks that businesses perform, knowing how activities qualify can be a very important step for your business in claiming this money you’re owed. In order for an activity to be considered research and development, it must meet these four requirements.
- Improve the quality, function, or reliability of a process or product
- Remove ambiguity in the development or improvement of a production process
- Be a systematic process with logical trial and error
- Be technological in nature
How Are These Credits Calculated In New Mexico?
Once you’ve determined that the activities your company has been performing actually qualify for these credits, you to understand how they are calculated. In the state of New Mexico, R&D tax credits are calculated as follows:
- Only small business owners performing qualifying research expenditures in the state of New Mexico can qualify for the credit
- The credit is equal to 5% of qualified research expenses
- The credit is equal to the sum amount of all gross receipts taxes, and 50% of withholding taxes paid on behalf of employees and owners who have no more than 5% ownership in the business
- To qualify, the business (taxpayers) can not have employed more than 50 employees, and must not have qualified research expenses of more than $5 million
- For companies that raise their in-state payroll by $75,000 for every $1 million in expenditures, an additional 5% credit is available to them
- Companies are able to claim these credits within 1 year after the reported period
What Are My Next Steps To Claim These Credits?
Having an experienced team of tax professionals help you go through your company’s activities and figure out what would qualify is your first step in claiming R&D tax credits. Our team at National Tax Group works with you to make sure the activities you want to claim qualify your business and can make the process quick and easy for your company. For a free assessment, call us at (561) 257-3436 to get your process started.