Research and Development Tax Credit
The Research and Development Tax Credit is a tax incentive designed to encourage companies to invest in innovation and technological advancements. It allows businesses to receive a credit against their tax liability based on qualified expenditures related to research and development activities.
Qualified R&D activities generally include developing new or improved products, processes, or software. Eligible expenses may encompass wages for employees involved in R&D, costs of supplies used in research, and payments to contractors for R&D services.
For example, a software development company that spends $100,000 on employee salaries for programmers working on a new application may be able to claim a percentage of that expense as a tax credit, effectively reducing its overall tax bill. The specific percentage and eligibility criteria can vary depending on jurisdiction and applicable tax laws.
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