R&D Tax Credits for Software Developers

Tax Point Advisors’ National Experts bring a Local Touch to clients in the software industry, uncovering optimal tax incentives. 

The federal research and development (R&D) tax credit was created to reward companies for an assortment of improvements to products and processes, including software development. Yet software development can often be overlooked for R&D purposes, such as when it is used for implementing a new system.

Given the volume of R&D integral to software design and development, companies involved in these activities are ideal candidates for claiming the tax credit. Most states offer state R&D tax credits that can significantly reduce a software developer's state income tax burden.

Further, the U.S. Treasury Department in 2015 released new regulations regarding internal use software (IUS) and its eligibility for the R&D tax credit. The clarification around IUS, which is now defined by the IRS as software used in general and administrative functions, enables additional software developers to claim R&D-based tax incentives. 

Click here to see if your software development activities qualify for R&D tax credits.

Typical Qualifying R&D Credit Activities for Software Developers

  • Programming software source code
  • Designing and developing the structural software architecture
  • Establishing electronic interfaces and functional relationships between various software modules
  • Conducting requirements, domain, software elements, or scope analysis for a new functional software enhancement
  • Evaluating and establishing functional specifications
  • Conducting unit, integration, functional, performance and regression testing
  • Compiling and testing source code
  • Developing new or improved technologies

Any software development activities must meet the four-part test to qualify for the R&D tax credit.

To learn more Tax Point Advisors’ R&D tax credit services for software developers, simply fill out the form on this page and a member of our team will be in touch with you. Or, you may call us at (800) 260-4138 nationwide.


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