Posted by William Mehi on 08.23.23
Architectural firms across the US are often missing out when it comes to federal research and development (R&D) tax credits. Architecture and engineering firms often conduct R&D activities daily, from experimenting with optimal building materials to developing better energy efficient technologies throughout a building. The research and development (R&D) tax credit is a general business tax credit for companies that are incurring R&D expenses in the United States. Originally our homes aimed to simply provide as much protection from the elements as possible; today, however, architecture trends are focused on lifestyles, particularly indoor-outdoor living. Creating rooms that effortlessly open to the outdoors, or rooms which bring nature inside, is a new challenge to modern architects. Experimentation with elements and materials has also become a big factor in the creation process. Another trend in home building is the development of new and improved smart technology and the convenience of added home features that can be controlled via a simple swipe or in-home video panel. Not only are these techie features convenient, many including lighting and HVAC control can reap real rewards on monthly utility bills if done correctly. For architects, the challenge becomes creating spaces to house any mechanicals and the necessary wiring that goes along with them. In order to help mitigate these challenges and maintain global market competitiveness, federal and state governments provide incentives in the form of tax credits. The most powerful of these tax incentives is the federal tax credit for increasing research and development expenditures (the R&D credit). Identifying and documenting your firm’s qualifying research activities can help maximize your tax credit, which could result in substantial tax credits for your firm.
The federal government implemented the Research and Experimentation tax credits in 1981 to create jobs and spur technology growth in the United States. Known as R&D tax credits, the program was meant to be a temporary measure to give the economy a boost. Subsequent modifications simplified the credit and made it available to a much wider variety of activities and industries. Given the popularity of the R&D tax credit program, many states followed suit by establishing their own programs. Today, more than 40 states offer R&D credits with attractive features and additional advantages.
Examples of Qualifying Activities:
The activities and associated expenditures of a company can qualify for the R&D tax credit if the activities meet the four-part test established by the IRS.
Qualified research must meet the following four criteria:
To claim the credit, architectural firms need to document that they performed qualifying work here in the United States with documentation. Things like new or improved building designs or an increase in the functionality, performance, reliability, or quality of a building or structure make a company eligible to receive tax credits. Given a typical architecture firm’s time-tracking software and project-documentation practices, the expenses should be easy to document.
To determine if your architectural firm could be eligible for R&D tax relief, get in touch with the team at Tax Point Advisors today. We specialize in helping businesses in the architectural industry to identify projects that are eligible for tax credits and make a successful claim.
Tax Point Advisors provides R&D tax credit study services and other specialty tax services to CPA firms and their clients throughout the U.S. To learn more about R&D tax credits from the experts at Tax Point Advisors, please call us at (800) 260-4138 or please leave us a message below to find out if we can help
