Cash For Innovation… Get Yours!

Last year some big changes were made to the R&D tax credit. These are particularly important to cash-poor startups.

The US government has provided incentives to taxpaying companies for innovation for many years. However, last year some big changes were made to the R&D tax credit. These are particularly important to cash-poor startups.

First, the Federal R&D tax credit was made permanent. Unless you’re a total tax geek (like me…) you probably didn’t know that the tax credit has been temporary since it was originally offered back in ’81. Every few years we wondered if it would be renewed. It always did (15 times, give or take…) But now there is no more wondering; it’s not part of the current tax law until and unless there is a specific legislative change.

Next, incremental incentives were offered to small businesses and startups. The biggest benefit is that qualified startups can use the R&D credit to offset the Social Security portion of the payroll taxes. This can be taken directly off your payroll tax returns and can put up to $7,800 per employee back into the company coffers.

This is a big shift for the R&D tax credit because historically you had to be profitable (a.k.a. taxable) before the credit did your company any good. Get with your VPTax (or other tax pro) and make sure the government is paying their fair share for your innovation!