Tool & Die Manufacturing R&D Tax Credits

According to the tax code, a business that designs or manufactures tools and dies is qualified for the Tool & Die Manufacturing R&D tax credit if it engages in one or more qualifying activities. Those can include streamlining a production process, validating product elements or components, or developing the software that facilitates the component design or manufacturing process. In addition, creating components other industries need for their production processes also makes your firm eligible for tax incentives.

In other words, your business may recoup up to 22% of research-related costs if it creates innovative prototypes, utilizes modeling technologies, or streamlines production processes. However, the exact credit amount depends on your firm’s location.

Qualifying Costs and Activities

Qualified expenditures include payrolls for subcontractors and positions like QA and CAD personnel, tradespeople, CNC machinists, tooling and operations engineers, mechanical and manufacturing engineers, and industrial designers. Although direct labor is typically the largest QRE in this industry, this credit can also capture supply and materials expenses, which often include the price of the tooling and dies themselves.

Qualified activities for the Tool & Die Manufacturing research and development tax credit are:

• Creating new fixtures, tooling, jigs, and dies;

• Designing unique components with CAD;

• Developing CNC or PLC system software;

• Quality testing first articles and prototypes;

• Optimizing manufacturing procedures to improve output;

• Creating and enhancing new items and processes.

Get in touch with our team to see how much money you can save from the R&D tax credit in the Tool & Die Manufacturing industry. We can give you an estimate free of charge and assist you in claiming the incentive.

FAQs

What kind of companies can apply?

Tool and die manufacturers 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.