Electronics (Technology) R&D Tax Credits

Innovation drives the technology field. In fact, many industries rely on electronics companies’ research activities to improve point-of-sale transactions, entertainment, and communication. Such sectors include retail, military, medical, consumer goods, and aviation. That’s why electronics companies are a natural fit for R&D tax incentives.

In other words, businesses investing in making new devices or scaling up existing technology can apply for the Electronics (Technology) research and development tax credit. This incentive is offered both federally and at the state level. Moreover, it can offset as much as 22% of your tax liability, but the percentage mainly depends on location. For instance, companies conducting R&D in Texas might get higher credit rates because this state is a powerhouse of technological innovation.

Qualifying Costs and Activities

Electronics firms are typically experimental. Consequently, many operations related to creating new products and processes might be suitable for the R&D tax credit in the Electronics (Technology) industry. Below is a list of qualifying activities.

• Enhancing testing systems to be used in the military sector;

• Creating new electrical components such as batteries, capacitors, and microchips;

• Developing innovative electronic products for business and consumer applications;

• Examining novel materials to reduce electricity usage and boost thermal efficiency;

• Designing new wireless networking gadgets (such as routers and garage door openers).

Typical qualifying expenses include subcontractors, cloud computing services, supplies, and employee salaries. Strictly speaking, you could cover job positions such as computer scientists, C-suite, electronics engineers, consultants, mechanical engineers, materials analysts, software developers, PhDs, and scientists.

Understanding what is required to verify a credit claim is essential, given the growing federal and state scrutiny around the Electronics (Technology) R&D tax credit. For that reason, we provide complete, end-to-end guidance and a complimentary credit benefit estimate.

FAQs

What kind of companies can apply?

Electronics companies that conduct qualifying research activities.

What data do I need to calculate credit?

Claim period gross receipts.

What information do I need to provide?

General ledger expense detail, payroll records, project notes, project lists, emails, purchase orders, and other documents regarding QREs for the claiming period.

Is credit carryforward an option?

Yes, up to twenty years.