Industry Brief  ·  Automotive Aftermarket

Every build is a test.

The federal R&D tax credit pays for the development work behind your parts, upfits, and specialty builds. Most builders never claim it.

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It costs nothing to find out. If there isn't enough credit to be worth claiming, you don't pay a thing.

New to youis enough. A part, upfit, or combination your shop hasn't built before can count when you had to test your way to it.
4 years of creditin one study: this year, plus past years still open to amend, usually three.
Exam supportcomes with every study. If the IRS asks, we answer.

What counts in your shop

Work you already do on new builds
  • Performance partsDesigning an intake, exhaust, or suspension part and testing it against stock.
  • Fitment and packagingMeasuring, test fitting, and revising until a new part fits the space.
  • Prototype fabricationBuilding a first article, finding what's wrong, and cutting the next one.
  • Dyno and track testingRuns that compare a tune, part, or setup change, with the data log to show it.
  • Upfits and conversionsWorking out the structure and wiring for a new body, lift, or equipment package.
  • Tuning and calibrationDeveloping an engine or transmission calibration for a new combination.
  • Emissions and safetyGetting a new design through emissions or crash requirements.
  • Jigs and fixturesDesigning the tooling to build a new part the same way every time.

The four questions, for aftermarket builders

§41's four-part test
  1. Did you build a part or upfit new to your shop?It doesn't have to be new to the industry.
  2. Did it take real know-how?Your builds rest on mechanical engineering, physics, and calibration code.
  3. Were you unsure at the start?Will the part clear the frame? Will it hold under load?
  4. Did you try options to find out?Test fits, dyno pulls, and revised prototypes are exactly that.

Unsure about any of these? That's what the call is for. The four-part test in plain English

Aftermarket builders ask

We modify vehicles. Is that really research?

It is when the modification raises a question you can't answer without testing. Designing a part or upfit and proving it works counts.

The prototype became a customer's vehicle. Does it still count?

Yes. A prototype that sells can still count, as long as the customer paid for a vehicle and not for your testing. The materials and time spent working out the design can qualify.

Does a build that didn't work count?

Yes. A design that fell flat on the dyno counts the same as a win when it tested a real unknown, and the parts used up on it can count as supplies.

We sell parts another shop designed. Do we qualify?

Reselling or installing finished parts doesn't count on its own. Developing a part, or reworking one when fit or function is a real unknown, can.

Filing, how far back, exams, and costs: common questions.

For your CPA: where the credit goes on Form 1120, 1120-S, 1065, or 1040.

Other industry briefs

Where else it lands
Electronics Manufacturing

Every board is a prototype.

Board design, firmware, and prototype bring-up can be development work that qualifies.

Read the brief Software Development

Your commits are research.

New features, architecture, and integrations with an uncertain outcome can qualify.

Read the brief Machine Shops

Your first articles can be research.

First articles, fixtures, and CAM programs for hard new parts can be process research.

Read the brief

Give us thirty minutes.

Bring whoever develops your parts and builds. You'll leave knowing whether your work qualifies.

Book a call Not ready to talk? See if you’re a fit in two minutes.