How the Expansion of the 2023 R&D Tax Credit Impacts You

R&D Tax Credit

President Biden signed the Inflation Reduction Act into law on August 16, 2022. With its passage, R&D tax credits in the form of payroll tax offsets have effectively doubled for qualified small businesses.

The payroll tax offset cap is increasing from $250,000 for the 2022 tax year to $500,000 for tax years starting after December 31, 2022.This is significant taxpayer-favorable news for small businesses and start-ups alike, as the effective doubling of the R&D tax credit potential will allow such companies to continue to invest these R&D tax credit dollars in innovative product/process development and maintain their R&D presence within the United States.

Eligibility Requirements

For 2023-purposes, a business is considered a qualified small business if they meet two tests:

  1. Generated less than $5,000,000 in sales less returns and allowances + investment income (e.g., bank interest, dividends, royalties, etc.)
  2. Did not incur gross receipts prior to the fifth previous tax year, including the current tax year. For purposes of 2023, taxpayers cannot have had gross receipts prior to 2019.

Next Steps

Our Firm’s experts are focused on the ins and outs of the R&D Tax Credit, working with researchers, scientists, engineers and software developers to understand their unique situations. Reach out to our R&D Tax Credit Services Team for a complimentary initial consultation.

Contact Us

For more information on this topic, please contact a member of Withum’s R&D Tax Credit Services Team.