More Taxpayers Can Benefit from Now Permanent R&D Tax Credit

The Research & Experimentation Tax Credit (R&D) is now a permanent tax law, making it easier and more efficient for businesses to do year-end tax planning. Until the Protecting Americans from Tax Hikes (PATH) Act went into effect in December 2015, the R&D Tax Credit had always been temporary and part of the annual Tax Extenders Legislation.

Beginning in 2016, PATH provides businesses with less than $50 million in gross receipts the ability to claim the R&D Tax Credit against the alternative minimum tax (AMT). This is similar to a provision originally enacted in 2010 which benefits a significant number of closely-held businesses and their owners.

Additionally in 2016, startup companies benefit as the R&D Tax Credit can now be applied against an employer’s payroll tax liability. To qualify, the startup company must be within their first five years of operations and have less than $5 million of revenue. The annual cap on the amount of payroll tax liability that can be offset is $250,000.

View the R&D Tax Credit Cheat Sheet for more information on the Research & Experimentation Tax Credit.

If you have questions about how the R&D Tax Credit applies to your business, contact an Anders advisor.