Pennsylvania 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.
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
- Credit carried forward up to 20 years
Qualifications
More companies in Pennsylvania can now qualify for the R&D tax credit. Companies are able to qualify R&D activities beginning with the development of concepts and extend 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, looking into a potential R&D tax credit may be a great benefit. In addition, look back studies can recognize unclaimed credits for the last 3 or 4 open tax years.
Case Study
A company in Pennsylvania, Pennsylvania claims R&D Tax Credits each year for the development activities of its engineers. This project involved a multi-year study covering the tax years 2011 – 2014. The Company qualified for the federal R&D Tax Credits of $359,917 and an additional $148,750 in Pennsylvania state R&D Tax Credits.
FEDERAL | PENNSYLVANIA | |||||
Year | Total QREs | Credit | Total QREs | Credit | ||
2014 | $1,300,000 | $135,333 | $1,300,000 | $65,000 | ||
2013 | 900,000 | 91,000 | 900,000 | 43,750 | ||
2012 | 650,000 | 63,000 | 650,000 | 27,500 | ||
2011 | 450,000 | 38,500 | 450,000 | 12,500 | ||
| Total | $3,300,000 | $359,917 | $3,300,000 | $148,750 | ||