R&D Tax Credit Services and Qualification Analysis
The federal R&D tax credit (IRC Section 41) rewards U.S. businesses for qualified research expenses, such as wages, supplies and contract research, spent developing or improving products, processes or software. It is claimed on Form 6765 and can reduce income tax; eligible small businesses can apply part of it against payroll taxes.
R&D tax credit by industry
| Industry | Typical qualifying activities | Typical expenses |
|---|---|---|
| Consumer goods and manufacturing | New product formulations, prototypes, process improvements | Engineer and technician wages, prototype materials |
| Food processing | New flavors, recipes, shelf-life and packaging testing | Food scientist wages, test batches |
| Engineering and architecture | Novel structural or systems design solving technical uncertainty | Engineer wages, modeling software |
| Software and financial services | New applications, algorithms and integrations | Developer wages, cloud computing for development |
| Pharmacy and life sciences | Compounding, formulation and process development | Scientist wages, lab supplies |
2025 tax law changes: Section 174A and the R&D credit
The One Big Beautiful Bill Act, signed on July 4, 2025, restored the immediate deduction of domestic research and experimental expenditures under new Section 174A for tax years beginning on or after January 1, 2025. Foreign research costs must still be capitalized and amortized over 15 years under Section 174.
- Catch-up for 2022–2024: businesses that capitalized domestic research costs in 2022–2024 may deduct the remaining unamortized amounts through an accounting method change, in one year or spread over two.
- Small businesses: companies with average annual gross receipts under $31 million could amend 2022–2024 returns to deduct those costs retroactively, but that window closed on July 4, 2026.
- Interaction with the credit: the Section 41 R&D credit continues, and the credit generally reduces the Section 174A deduction unless the reduced-credit election under Section 280C(c) is made.
Talk with your tax advisor about how these changes affect your claim. Source: CohnReznick summary of the OBBB R&D rules.
Overview
One of The Most Lucrative and Overlooked Tax Savings Opportunities.
Signed into law by congress in 1981, The U.S. Research and Development Tax Credit – sometimes called the Research and Experimentation Tax Credit – helps companies remain competitive by allowing a reduction of federal and state income taxes for qualified expenditures. Investing in research and development is vital to innovation, and innovation is the driving force of our economy.
The 2015 PATH Act made the tax credit a permanent part of the IRS code, and allows almost any manufacturing or technology company to take advantage of the credit. With no limit on the R&D Tax Credit funding, U.S. businesses stand to receive benefits which can increase your company’s bottom line – both at the federal and state levels.
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Speak to an expert at 312-697-7187
or fill out the form below.
Many Companies Don’t Realize All The R&D Expenses They’re Entitled To.
Credits are not limited to businesses that solely provide product development — they are equally applicable to companies that develop new processes including improved efficiencies. Companies may claim the credit for products they have developed to sell to their customers. In fact, many of our clients claim credits based solely on what they invest in developing a new product or process for their customers.
benefits
A Hidden and Immediate Source of Cash For a Wide Range of Businesses.
Benefits Include:
Cash back from the IRS for open tax years
Provides cash refunds of previously paid federal and state taxes.
Reduced effective tax rate
Dollar-for-dollar reduction of current-year federal tax liability and applicable state tax expense.
Future tax savings
Credit carries forward, up to twenty years
Increased cash flow
Frees up capital for investment in your business, new development, and debt reduction.
Earnings per share boost
Increases the value of your business to investors or potential buyers.
Payroll tax expense refund/reduction.
Apply the federal R&D tax credit against payroll tax (applicable to certain startup companies)
Who Qualifies
Any Corporation, Organization, Trust, Estate, or Individual Can Claim R&D Tax Relief
Recent changes have made the R&D Tax Credit more beneficial to small and mid-sized businesses, and even to start-ups. This is because the landscape of R&D rules, IRS policy, and legal interpretations has led to a net increase in R&D-eligible activities in recent years.
You Can Claim the R&D Credit Even If You're Unprofitable.
The PATH Act of 2015 allows small businesses to claim R&D costs against payroll taxes, resulting in a refund from the IRS.
R&D tax incentives Are Available to Any industry:
- Architecture
- Automotive
- Construction
- Cosmetics
- Energy & oil field services
- Engineering
- Food & Beverages
- Manufacturing
- Pharmaceuticals & Health
- Plastic mold injection
- Software
- Tool & Die / Job shops
Examples
Client
Architectural Firm
- $195,000 in R&D Tax Credits
- Annual Revenue: $8.5 million
Client
Software Developer
- $985,000 in R&D Tax Credits
- Annual Revenue: $11.5 million
Eligibility
What Kind of Research and Development Activities are Eligible for the R&D Credit?
Companies no longer need to develop a product or process new to their industry to qualify for the research and development tax credit. These improvements only need to be new to their company.
R&D credit – qualified activities:
Technical Activities, or Those That Involve Design, Development, or Improvement of New or Existing :
- Processes
- Techniques
- Inventions - applying for patients/ prototyping
- Products
- Formulas
- Software (for use or sale)
Or, activities focussed on improving:
- Processes
- Techniques
- Functionality
- Quality
Qualifying expenditures can include:
- U.S. wages (including supervising and support staff)
- Materials and supplies used for R&D
- Customer assistance with technical problem-solving
- U.S. Contractor Cost
- Cloud Computing Development Expenses
The Four-Part Test
Established by the IRS, a four-part test can help you identify if your company’s research and development activities qualify for R&D tax credit.
Purpose
The research improves the quality, function, or reliability of a process or product.
Process
The research activities involve stimulation, logical trial and error, assessing alternatives, and refining hypotheses.
Uncertainty
The qualified activities identify information to remove ambiguity in the development or improvement of a production process.
Nature
The research relies solely on physical sciences, biological sciences, computer sciences, or engineering.
Why Meridian?
Our Team has Decades of Success defending the Credit with the IRS and State Taxing Authorities.
Our licensed engineers and attorneys are specialized across a wide range of industries including:
- Manufacturing
- Design & Construction
- Intellectual property
- Software & Technology
- Pharmaceuticals
We’ve delivered studies for Fortune 500 companies, mid-sized companies, and small businesses. Our expertise has been shaped by experience managing hundreds of R&D tax credit studies, as well as R&D state and federal audits, many through conference appeals. And, Meridian’s lead legal strategist has influenced the code and regulations, expanding qualifications.
Receive every benefit you qualify for
We take the time to get to know our clients’ business, ask the right questions, and document our results, saving more than $70 million in tax payments annually, with a comprehensive approach to qualifying and quantifying credits.
A lot of providers cut corners to increase profit margins at the client’s expense. For example, instead of identifying and documenting 3 to 5 of the biggest projects conducted by a client in a prior year, we uncover every qualifying activity.
Don’t let tax savings go unclaimed.
If you think your company might be performing work that qualifies for the R&D tax credit, don’t let tax savings go unclaimed—and don’t be deceived by preconceived notions of what R&D is, or which companies can qualify.
Across industries, the possibilities for qualifying activities are out there, and if you’re willing to take a look, you could uncover vital tax savings to reinvest in your business and fuel your next big project. To learn more about the credit and how much you might save, contact us.
Case Studies
Engineering firm receives $400,000 in tax credits
Food Processor receives $800,000 in Tax Credits
Custom machinery manufacturer receives $1.1M in tax credits.
Get Started
Claim Your Tax Savings
It’s important to develop a system to easily track R&D activities, and understand which activities are deductible.
Consider the following:
Do you employ chemists, engineers, programmers or scientists?
Do you build prototypes?
Do you subcontract any engineering or testing functions?
Do you develop and/or improve new products or processes internally, or for clients?
Do you employ chemists, engineers, programmers or scientists?
To learn more about how we can assist you with research & development services, please complete the form below, or contact us.
Please fill out this form to help us identify if your research and development expenses qualify for the R&D Tax Credit.
Frequently asked questions
What is the four-part test?
Each activity must have a permitted purpose, be technological in nature, aim to eliminate technical uncertainty, and involve a process of experimentation.
Which expenses qualify?
Wages for people performing or directly supporting qualified research, supplies used in research, generally 65% of U.S. contract research costs, and certain cloud computing costs.
How do I claim the credit?
Document qualifying projects and expenses, calculate the credit, and file Form 6765 with your return. See our step-by-step guide: How to Claim the R&D Tax Credit.
Can a startup use it?
Qualified small businesses (generally under $5 million in gross receipts) can elect to apply part of the credit against payroll taxes.
How far back can I claim?
Generally, open tax years can be amended to claim missed credits.
Does my state have its own credit?
Many states, including Illinois, offer separate research credits.
This page provides general information, not tax advice. Talk with your tax advisor about your situation.
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