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.


  • 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.


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.

Total QREs
Total QREs

Learn more about Colorado's tax state benefits.

Four-Part Test

Qualified research activities are defined by the four-part test outlined below

Technological in Nature
Activities must fundamentally rely on the principles of physical or biological science, engineering, or computer science.

Permitted Purpose
Activities must be performed in an attempt to improve the functionality, performance, reliability, or quality of a new or existing business component.

Eliminate Uncertainty
Activities intended to discover information that could eliminate technical uncertainty concerning the development or improvement of a product.

All activities must include a process of experimentation including testing, modeling, simulating, and systematic trial and error.

Research and Development Tax Insights

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