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The R&D tax credit has been in place for over 35 years, but in December, Congress extended it and made the it permanent. They also changed its scope to allow more small and midsize businesses to participate. It also shifted the credit’s focus from considering only revolutionary developments within an industry to rewarding evolutionary activities such as investing time and resources in the development of new ideas that, while valuable, are not necessarily groundbreaking.

The R&D Tax Credit in a nutshell
The R&D tax credit allows US businesses to reduce some of the financial burden associated with researching and developing new products and procedures, or innovating and improving existing products and procedures. The maximum amount a company can claim is $250 K.

So, what qualifies as research and development for digital marketers? Activities that involve experimenting, developing, or testing new procedures or applications that can make an impact on the work you do.

  • Creating alternative design concepts;
  • Using unique materials in construction for structural or energy efficiency reasons;
  • Testing to determine acoustical, lighting, and visual features (Beeline's wall decor could fit in here);
  • Technical factors and materials for sanitary or safety uses (including signage or construction for COVID education).  
A claim must meet four criteria to be eligible for the credit:

1) the research is technological in nature and integrates one of the hard sciences, such as using computational design tools;

2) it creates a new or improved level of functionality, reliability, or durability, like designing for better energy efficiency;

3) it eliminates some uncertainty that was present at the start of the process, such as devising alternative design approaches for high wind loads; and

4) it involves experimentation, which could be as simple as trying out different designs to lower material costs for a project.

The funds can even be used for a variety of projects. One AIA firm was able to use the credit for time spent creating a brand look, plus some outside consulting work, on a project for a men’s clothing retailer.
It's worth the effort to discover if you qualify
The tax savings are a dollar-for-dollar credit that can be collected on up to 6.5 percent of employee wages for time spent by designers, supervisors, and support staff on qualified activities. Additionally, 65 percent of the amount paid to contractors, such as the experts at Beeline and Blue, can be claimed as a qualified expense and used toward the credit.
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