Industry Brief  ·  Software Development

Your commits are research.

The federal R&D tax credit pays for development work your team already does. Most small software companies 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 feature or architecture your company 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 on your team

Work your team already does
  • New productsDesigning and building an application or platform from scratch.
  • Architecture and scalingWorking out how a system handles more users, data, or load.
  • AlgorithmsSearch, matching, pricing, or scheduling logic that has to perform.
  • IntegrationsMaking your system work with another platform's data or API.
  • Performance and reliabilityRedesigning a system to fix latency, concurrency, or uptime when the fix wasn't known.
  • Data and machine learningBuilding models and pipelines, then testing whether they perform.
  • Security and infrastructureDesigning authentication, encryption, or deployment for a new requirement.
  • Testing and QAWriting and running the tests that prove a new build works.

The four questions, for software teams

§41's four-part test
  1. Did you build something new to your company?A feature or architecture. It doesn't have to be new to the industry.
  2. Did it take real know-how?Easiest part for you. Your work rests on computer science.
  3. Were you unsure at the start?Will it scale? Will it hold up under load?
  4. Did you try options to find out?Prototypes, failed builds, and refactors. Your commit history is the evidence.

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

Software companies ask

We build internal tools, not a product. Do we qualify?

Sometimes. Software for your own back office faces a higher bar. Software you sell, license, or use to serve customers doesn't.

We use offshore developers. Does that hurt?

Work done outside the U.S. doesn't count. What your U.S. team does can still qualify, and U.S. contractors count at 65% when the contract allows.

Do bug fixes and maintenance count?

Keeping the lights on doesn't. A fix that needed a redesign, or one nobody knew how to make, does.

We're pre-revenue. Is the credit any use to us?

It can be. A young company with little income tax may be able to apply it against payroll tax instead.

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
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 Metal Fabrication

Your weld procedures are research.

New weld procedures, fixtures, and first articles can be process research that qualifies.

Read the brief Medical Imaging

Your image pipeline is research.

Building interfaces and integrations nobody sold you can be qualified development.

Read the brief

Give us thirty minutes.

Bring whoever leads your engineering work. You'll leave knowing whether your projects qualify.

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