global Tax Expanded Your Technical Team This Year? Time to Consider the R&D Tax Credit September 29, 2025 Hiring engineers, developers, or scientists? Their work may directly translate into tax savings. See if you can benefit from the Research and Development (R&D) tax credit. Did you bring on engineers, software developers or scientists this year? You could be sitting on a tax break you didn’t know you had, the valuable Research and Development (R&D) tax credit! Don’t miss out on savings for work your team is already doing, here’s how you can benefit. Quick Takeaways The R&D tax credit can apply to businesses of all sizes, not just large corporations.Hiring technical talent can boost eligibility. Many engineering, software, and science roles naturally engage in qualifying activities.Qualified research doesn’t have to be groundbreaking. Improvements to existing products or processes often qualify.Documentation is key. You must track activities, costs, and experimentation. What is the R&D Tax Credit?The Research & Development (R&D) tax credit provides tax savings for businesses of any size that design, develop or improve products, processes, techniques, formulas, or software. It incentivizes companies to invest in innovation and applies to both improvements to existing processes and entirely new initiatives as well.What Does the Credit Apply to?Qualified research must meet the following four criteria:New or improved products, processes, or softwareTechnological in nature (grounded in engineering, physical sciences, biology or computer science)Elimination of uncertainty (addresses unknowns in capability, method or design)Process of experimentation (tests alternatives to ultimately reach a solution)Eligible costs include employee wages, cost of supplies, and contract research expenses.Did You Recently Hire an Engineer or Scientist? Take a Closer Look at Your R&D Credit EligibilityHiring technical talent can significantly boost your R&D credit eligibility. Engineers, software developers, data scientists, and similar roles often spend a substantial portion of their time engaging in qualified activities, such as:Designing and testing prototypesWriting and refining software codeDeveloping algorithms and data modelsImproving manufacturing methods and automation systemsConducting trials and analyzing resultsIf your team members are spending time problem-solving, testing, and pushing the limits of what’s possible, chances are they’re contributing to qualifying R&D activities. “We recently worked with a company that hired additional engineers and software developers to push a new product to market. They had no idea their hiring decisions boosted their eligibility for the R&D tax credit. Once we identified and documented their qualifying activities, they secured substantial savings, allowing them to put money into funding additional hires and accelerating innovation.” - Deborah Pallasch How Do You Go About Claiming the R&D Credit?Claiming the R&D credit requires identifying and documenting qualified activities and expenses. Steps typically include:Identify Qualifying Projects – Review recent and ongoing projects against the IRS four-part test.Track Time and Costs – Keep detailed records of wages, materials, and outside contractor expenses.Document Your Process – Maintain notes, test results, prototypes, and other project records that show experimentation and problem-solving.File Federal and State Forms - Coordinate with your tax team to file required forms to claim the credit.FAQs: R&D CreditIs the R&D tax credit only for tech companies? No. Any industry can qualify if the work meets the IRS requirements. This includes manufacturing, agriculture, food production, and construction.Does the research need to be “new to the world”? No. It just needs to be new or improved for your business, even if competitors have already implemented similar solutions.Can startups claim the credit? Yes. In some cases, eligible small businesses can use the credit to offset payroll taxes instead of income taxes.What if I didn’t track all my R&D activity in real-time? You can still claim, but it may require reconstructing documentation from project notes, emails, timesheets, or prototypes.How much could I save? Savings vary, but many companies see thousands to hundreds of thousands of dollars in tax credits.Did the OBBBA impact the R&D Credit? No major changes to the R&D tax credit were enacted as part of Trump’s One Big Beautiful Bill Act (OBBBA). Check out changes for business owners here: 2025 Big Beautiful Bill Signed Into Law: What Tax Changes Mean for Business Owners
