The Federal Government breathed some new life into the old R & D Credits (Research and Development). Many business owners believe they do not qualify for R&D. They may be wrong. If you are working to improve or streamline a product or process, you may be eligible for this credit.
What has the government done to improve the life of this credit?
- They made it a permanent part of our tax law. In the past it was a temporary measure which was extended each time it expired. Now business owners can count on this credit being available in the future as they spend time and money to improve their product or process.
- In the past this credit could not offset the Alternative Minimum Tax (AMT). This meant that many companies received little or no benefit from the credit. Starting in 2016, companies with average gross receipts over the past three years of less than 50 million dollars can use this credit to reduce the AMT.
- The final improvement to the R&D Credit is that starting in 2016 startup businesses with less than 5 million dollars in gross receipts can use up to $250,000 in credits against some of their payroll taxes starting in 2017.
These changes will make the R&D Credit much more useable by small and medium sized company. To learn more about how the tax team at LSL CPAs can help, please contact us at 714.569.1000.
