Owning and operating a lab means being subject to various forms of tax credits. During the tax season, you may notice some new tax credits that could apply to your lab. For example, the R&D tax credits may come your way. This credit deals with research and development. If you are considering taking this credit on your taxes, there are a few things you should know before approaching your accountant with the possible options. Here are a few of the key points to know about this credit and how it may apply to your situation.
The key point to understand regarding this tax credit is in the research. The research for the tax credit to be able to apply must deal with developing something to help the industry you are in. For example, you may be doing research on a new diabetic device using smartphones as the device. This could fall under the tax credit because it is working to develop a device that could help people and could further the medical world to advanced methods of handling diabetic glucose meters and care.
You may not be handling the research, but instead the development of the product resulting from that research. This development means coming up with a prototype of the device and making it work without having any issues or major problems. For example, you may be working on the app that connects to the research of a smart device product for diabetics. Over the course of the year you spent money, man hours, and office time working on how the device could work and finding parts and research code to make the app and the device work together. This could be considered as part of the R&D tax credit.
The foundation of the research and development must be based in scientific reasoning and logic. In other words, it must be something that is backed up by research. This research must be qualified. This means it should follow a certain criteria to prove the idea, that research was done according to the governmental criteria, and the research and development built a logical foundation to the development of the product or service.
If you think an R&D tax credit may apply to your lab and the workings of that lab, contact your accountant. Your accountant can help you determine if it will apply and can help with the forms that deal directly with the tax credit. They can also discuss other credits that may apply to your tax situation.