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.

FEDERAL
COLORADO
Year
Total QREs
Credit
Total QREs
Credit
2021
$1,300,000
$130,000
$1,300,000
$110,000
2020
$900,000
$900,000
2019
$650,000
$650,000
2018
$450,000
$450,000
Total $3,300,000 $130,000 $3,300,000 $15,750

Learn more about Colorado's tax state benefits.