VR/AR Development R&D Tax Credits

Virtual reality and augmented reality technologies are gaining traction because they promise to forever alter the way humans and machines interact. In fact, according to a report from Research and Markets, the virtual reality industry was valued at $6.1 billion in 2020, with an annual growth rate of 27.9%. Moreover, it is expected to reach $20.9 billion by 2025.

Several industries and sectors, like retail, mobile apps, gaming, and e-sports, rely on VR and AR to deliver top-notch experiences and services. However, developing such technology requires expensive research, which is why virtual reality companies use the VR/AR Development R&D tax credit to recover some of the costs. The incentive covers up to 22% of eligible expenses.

Qualifying Costs and Activities

To determine whether your business qualifies for the R&D tax credit in the VR/AR Development industry, look for the following qualifying activities:

• Video game creation and development;

• Mobile applications creation and development;

• Graphics techniques and algorithms development;

• Hardware equipment and headset prototyping;

• Source code development and improvement.

Furthermore, your QREs may include employee salaries, cloud computing services, subcontractors, supplies, contract searching, testing, and costs related to developing a patent. You can also use the credit to cover taxable wages for VR/AR software developers and processing engineers, 3D renderers and modelers, sound effects specialists, audio and gameplay engineers, and product managers.

Contact our experts to determine whether your VR/AR project qualifies for the VR/AR Development research and development tax credit. You will have the best team possible on your side to maximize your claim and avoid potential risks.

FAQs

What kind of companies can apply?

VR/AR developers 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.