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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.

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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