Research credits: year-end tax strategy — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Research credits: year-end tax strategy

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in Small Business Tax

Your company may claim a tax credit for research expenses that are undertaken to discover information that is technological and intended to be useful in the development of a new or improved business component. This includes research for new products, improvement of existing products, qualification and patent testing, etc.

Strategy:
Ramp up your research activities. Although the credit is expected to be extended by Congress, it currently expires at the end of the year. In any event, you can derive a tax benefit for expenditures made in 2009. 

The research credit is generally equal to 20% of the qualified expenses over the base amount (i.e., an average figure for the preceding four years). Alternatively, your company may elect to claim a simplified credit. Under a recent law change, the alternative simplified credit is increased to 14% of the average expenses for the prior three years (up from 12%).

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