Design-build firms, specialty contractors and manufacturers of building components.
Research & development credits
Innovation you already
paid for.
The research credit rewards the work of figuring things out: new products, better processes, custom designs, software. Many businesses qualify without a laboratory.
How it works.
Section 41 provides a credit for qualified research expenses: wages, supplies and certain contract research tied to activities that pass a four-part test. The work must be intended to develop or improve a product or process, rely on hard sciences or engineering, address technical uncertainty, and involve a process of experimentation.
Builders, manufacturers, engineering firms, food producers and software companies routinely qualify through design iterations, prototyping, process improvements and custom fabrication. The credit reduces tax dollar for dollar, and qualifying small businesses can apply part of it against payroll tax.
The credit is only as strong as its documentation. Project lists, time records and technical narratives need to connect the dollars to the activities. Recent law also changed how research costs are deducted, so the credit and the deduction should be planned together.
Who it fits
New products, tooling, automation and process improvements on the shop floor.
Structural, mechanical, civil and energy design work that resolves technical uncertainty.
Internally developed platforms, integrations and products.
What the engagement looks like.
- 01Qualification interview
Walk through projects and roles to identify activities that meet the four-part test.
- 02Expense capture
Tie wages, supplies and contractor costs to qualified projects.
- 03Documentation
Technical narratives and workpapers that substantiate the claim.
- 04Credit calculation
Federal and state computations delivered to your CPA for the return.
Innovate Real Estate Tax Strategies does not provide legal advice. Final tax positions should be evaluated with your independent tax advisor.
Common questions
Before you start.
Every engagement begins with a free review of your facts. These are the questions we hear most.
Can I claim prior years?
Open tax years, generally the last three, can be amended to claim the credit. Unused credits carry forward.
Do I need to have succeeded?
No. Failed projects can qualify. The test is about the process of experimentation, not the outcome.
How is this coordinated with my CPA?
We deliver the study and the credit forms; your CPA files them with the return and remains your tax advisor of record.
Reviewed October 23, 2026. References: IRS: Research credit (Form 6765) instructions, IRS: Audit techniques guide, credit for increasing research activities. Educational overview; individual facts determine treatment.
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