R&D Tax Credits for the Automotive Industry

Refunds are available for companies performing research within the Automotive Industry. The research credit provides dollar-for-dollar cash savings each year for companies performing activities related to the development of new or improved products and processes. These benefits could provide much needed cash to hire additional employees, increase R&D, expand production facilities, etc.

Many companies involved with automotive processes are unaware that their efforts within designing and developing their products can yield a large amount of research credits. Examples of R&D activities related to the industry as well as potentially qualifying job titles are listed below.

Examples of Qualifying R&D Activities

• Computer-aided design (CAD), modeling, and simulation of parts
• Designing and testing prototypes such as vehicle body, alternator, battery, serpentine belts, drivetrain system, transmissions, airbags, brakes, tires, windows, and electrical components
• Improving efficiencies in manufacturing processes of the automotive body and internal components
• Improving existing parts to increase performance and reliability
• Testing automotive parts to meet regulatory compliance and safety requirements

Potentially Qualifying R&D Job Titles

• Automotive Engineers
• Brake Specialists
• Electrical Engineers
• Engineering Managers
• Production Engineers
• Production Supervisors

AMT Offset

For tax years beginning after December 31, 2015, eligible small businesses (those with $50 million or less of gross receipts) may claim the research credit against AMT liability. ​​​​​​​

Up to $250,000 in Payroll Tax

Qualified start-up companies may elect to use up to $250,000 of the research credit against payroll taxes. Treasury Regulations have substantially broadened the range of taxpayers who are eligible for the credit. Start-ups to publicly traded businesses who were previously unable to realize a benefit from this lucrative tax credit should reassess their eligibility.