Posted by William Mehi on 02.27.25
As an industry significantly invested in research and development (R&D) activities, aerospace companies can further reinvest in their growth by qualifying for federal and state R&D tax credits.
Unclaimed Credit
A misconception has long been held that research and development (R&D) tax credits are reserved for scientists, medical researchers and others wearing white lab coats. The situation was further muddied by the fact that the tax credit program was temporary— hastily extended more than a dozen times since its passage in 1981. As a result, businesses in many industries have missed out on thousands – even tens of thousands – of dollars in money-saving opportunities each year.
The Opportunity
Now that federal R&D tax credits have been made permanent, aerospace companies that are dedicated to introducing new technology and innovating new products can benefit from these valuable tax credits. A partial list of eligible activities for aerospace companies:
The Benefit: A Success Story
Your aerospace company can receive hundreds of thousands of dollars a year and up in tax credits to reinvest in your company’s innovative activities. For example, when Tax Point Advisors began working works with a Connecticut aerospace company, it was receiving R&D credits in the five-figure range. After our tax credit study revealed many additional qualifying activities, the company now receives tax credits in the six-figure range.
As a result, the company has expanded its facilities, hired more engineers and other employees—all based on new work they are receiving because of the additional investment they were able to make in their business from the tax credits.
They have been able to streamline their entire processes using tracking software they created. Overall, they are less risk-adverse in trying new processes and techniques.
Small Business Eligibility
In approving the legislation that made federal R&D tax credits permanent, Congress also expanded the playing field in favor of smaller companies by including small businesses with less than $5 million in revenue a year. The legislation also makes it possible for those companies with $50 million and less in gross receipts, based on a 3-year average, to apply the tax credit against the alternative minimum tax (AMT). This is big news for shareholders of qualifying pass-through entities, such as S corporations and partnerships that have an AMT liability.
Find Out if Your Activities Qualify
The R&D tax credit can be a lucrative incentive for innovative businesses in the aerospace industry. Given the permanent nature of the tax credit, now is the time to consider whether activities performed by your company qualify for major cash-saving tax credit opportunities.
It is understandable that you may not be certain about whether a particular activity qualifies. You may also need the help of a professional to help you document all of your R&D activities.
Tax Point Advisors, a firm with expertise in working with small and midsize companies, works with businesses that may qualify for R&D tax benefits. For more information, please contact 800-260-4138 or please leave us a message below.
