Colorado R&D Tax Credit Case Study
The R&D tax credit is one of the most valuable credits leveraged by companies. The R&D credit yields billions of dollars in federal and state benefits to companies engaged in qualifying research. The R&D tax credit can provide a significant reduction to current and future tax liabilities and a source of cash for companies performing R&D in Colorado.
Benefits
- Up to 13.5 cents of R&D tax credit for every qualified dollar
- Dollar-for-dollar reduction in your federal and state income tax liability
- 25% of the credit can be used each year and it is carried forward until the credit is used.
Qualifications
More companies in Colorado can now qualify for the R&D tax credit. Companies are able to qualify R&D activities by beginning with the development of concepts and extending to the point where a product, process, formula, or other business component is ready to be commercially released. If you are engaged in any research activities in Colorado, looking into the state’s R&D tax credit may be a great benefit. In addition, a look back study can recognize unclaimed credits for the last 3 open tax years.
Case Study
A Denver-based engineering firm had never claimed the R&D Tax Credit before. This project involved the tax year 2021. The Company qualified for the 2021 federal R&D Tax Credit of $130,000 and an additional $15,750 of state R&D Tax Credit in Colorado, of which $3,938 could be claimed in 2021.
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FEDERAL
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COLORADO
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Year
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Total QREs
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Credit
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Total QREs
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Credit
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2021
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$1,300,000
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$130,000
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$1,300,000
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$110,000
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||
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2020
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$900,000
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$900,000
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2019
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$650,000
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$650,000
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2018
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$450,000
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$450,000
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| Total | $3,300,000 | $130,000 | $3,300,000 | $15,750 | ||
Learn more about Colorado's tax state benefits.