The R&D tax credit is a tax incentive offered by the federal government to encourage businesses to develop new and improved products and processes. The ultimate purpose is to keep the U.S. competitive in the global marketplace.
The R&D tax credit directly addresses the two main challenges businesses face when it comes to research and development—it’s risky and expensive. Research can place a financial strain on a business because it typically requires high-paid staff to conduct it, as well as plenty of dedicated time. Many businesses also find that they must engage third-party research institutions or vendors in order to complete the work. All these things consume precious resources that businesses—especially smaller ones—can struggle to meet. And after all that expenditure of time, money and resources, there’s no guaranteed outcome of success.
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