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.
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.