Bio-medical & Pharmaceutical R&D Tax Credits

Bio-medical and pharmaceutical industries must grow as we look for novel treatments for emerging diseases. Furthermore, they encompass various businesses and activities, such as biopharmaceuticals, medical equipment and supplies, and analytical testing. For this reason, these sectors are ideal candidates for R&D tax credits. And considering that a key oncology study costs $45.4 million on average, the additional funds are more than welcome.

Qualified research expenses (QREs) are a broad category of support activities that can be deducted from income using the R&D tax credit. Examples include reagent preparation and the time and money needed to gain FDA clearance. To help you learn more about this topic and whether your company qualifies, this article will specify which activities and costs qualify for an R&D tax credit.

Activities Entitled to Bio-medical and Pharmaceutical Research and Development Tax Credits

You might be entitled to R&D tax credits of up to 25% of qualified expenses if your company has worked to produce new or better medications, medical equipment, formulations, or technologies. For example, The Orphan Drug Tax Credit (ODTC) permits corporations to claim up to 25% of qualified clinical testing expenditures (QCTEs) incurred in the current year and three preceding years to offset investment in uncommon (orphan) ailments.

Numerous states provide additional tax benefits. Companies in their early stages of development and start-ups with fewer than five years of income can also use research and development tax credits to counterbalance future payroll taxes.

Sectors like analytic research laboratories, vaccines, clinical trials, compounding, generic and orphan drug developments, and medical devices have already claimed millions in R&D tax credits. For instance, using QREs worth $1 million, a small biotech business may save $100,000 annually in federal taxes.

Qualifying Activities

• Creating novel treatments, medications, and chemicals

• Creating novel, non-commercially accessible test procedures

• Enhancing drug formulations or medication delivery methods

• Conducting clinical trials and pre-clinical research (Phases I-III)

• Determining new uses/treatments for current medications

• Producing generic versions of medicines without patents or exclusivity

• Testing to meet government regulatory standards

• Enhancing medication production methods

• Formulation personalization (compounding pharmacies)

Qualifying Costs

Companies may deduct expenses for staff salaries, raw materials and supplies, computer rentals, and outside contractors incurred throughout the R&D process. Potential qualifying job titles include research scientists, C-Suite, QA/QC employees, chemists and biochemists, clinical trial coordinators, microbiologists, laboratory technicians, and mechanical and biomedical engineers. In fact, 65% of third-party contractor expenditures are deductible (CROs).

By amending past years’ tax filings (for up to three years), businesses are able to receive additional financial benefits from tax refunds under current law. The IRS permits taxpayers to carry credits forward for up to twenty years if they are unable to use the R&D credits right away.

When You Need Expert Help

We work with a success-based pricing system that lets companies claim R&D and Orphan Drug refunds and credits without paying upfront. We also provide full audit protection as well as a money-back guarantee. To determine your possible advantage, utilize our R&D Tax Calculator.