R&D CREDITS FOR ARCHITECTURE

What if you could save thousands of dollars annually in taxes—all thanks to work you’re already doing? Through R&D tax credits, you can.

WHAT IS THE FEDERAL R&D TAX CREDIT?

Each year the U.S. government provides billions of dollars to innovative businesses for developing and improving technologies, products, and processes.

THE HISTORY

1981

The R&D Tax Credit was introduced in the

TODAY

WHAT IS IT WORTH?

For most companies, the credit is worth 7-10% of qualified research expenditures. This is a dollar-for-dollar credit against taxes owed which can dramatically lower your effective tax rate. Plus, it can carry forward 20 years. For young businesses that are not yet profitable, applying the credit against payroll taxes is a valuable, non-dilutive funding opportunity.

R&D tax credits can be used to offset:

  • Income taxes if you’re in a taxable position.
  • Alternative Minimum Tax (AMT) if you have less than $50 million in average revenue for the three preceding years and you owe AMT in the current year.
  • Employer portion of payroll taxes up to $250,000 each year if you’re a qualified small business.

WHAT ARCHITECTURE ACTIVITIES QUALIFY?

Many architecture firms perform activities that qualify for the R&D tax credit without realizing it. Examples include:

THE 4 PART TEST

  1. Developing new or improved designs
  2. Evaluating alternative designs to meet or overcome complex client requirements, site conditions, or building codes
  3. Evaluating alternative designs and materials for structural or energy optimization, and/or to achieve LEED certification
  4. Determining or testing optimal designs for lighting, acoustical, or visual qualities within a structure
  5. Using building information modeling and computational analysis tools to assess designs for various functional requirements
  6. Developing schematic designs, site plans, and elevation drawings

ELIMINATION OF UNCERTAINTY

  • Are you asking questions like, "Can we develop it?" or "How do we develop it?"

PROCESS OF EXPERIMENTATION

  • Are you systematically evaluating one or more alternatives?

Developing environmentally friendly buildings.

WHAT EXPENSES CAN BE CLAIMED?

There are three types of expenses you can include.

R&D SAVINGS SCENARIO

A firm invests $4MM to test designs for energy optimization. Of this capital, $1.16MM is spent on qualified innovation activities as follows:

  • WAGES
    Often the largest component; W-2 Box 1 wages paid to U.S.-based employees or wages earned by company owners.

    Amount: $1,102,000

  • CONTRACT EXPENSES
    65% of payments made to U.S.-based contractors or third party developers.

    Amount: $41,145

  • SUPPLIES
    Non-capital/non-depreciable materials and tools used or consumed in the development process.

    Amount: $24,000

TOTAL R&D SPEND

CREDIT AMOUNT = $116,715

Clarus R+D helps innovators claim the R&D tax credits they’ve earned. We focus on small to midsized businesses that have traditionally missed the R&D tax credit because of the perception that it’s too complex or costly. Our software simplifies the process and maximizes your benefit.

  1. Identify projects
  2. Define innovation
  3. Take 4-Part Test

CALCULATE

  • Categorize project expenses

You’ve earned this money. So what are you waiting for?
Estimate your savings now at clarusrd.com/calculator.

  • Create nexus
  • Calculate credit

DOCUMENT

  • Generate IRS compliant documentation
  • Create IRS tax form 6765

MONETIZE

  • Coordinate with tax preparers, CPAs, and payroll providers
  • File amendments and payroll tax returns

THE RESULT