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Engineering R&D Tax Credits

Research & Development Tax Credit for the Engineering Industry

Each year, foreign corporate enterprises leverage their own government assistance and incentive programs to win ownership of worldwide engineering projects, ultimately compromising the United States’ ability to compete in the global marketplace. To level the playing field within the engineering vertical, the U.S. federal government has expanded the R&D tax credit program to broaden the definition of qualifying activities and drive final business investment decisions.

Explicitly designed to stimulate innovation, job growth, and U.S. competitive advantage, the research and development tax credit recognizes the costs to drive innovation can prove significant and prohibitive. The R&D’s federal and state incentives offer a wide range of tax credits for qualifying businesses, essentially rewarding engineering companies for developing new and improved designs, concepts, and processes to edge out other engineering leaders around the world.

Do Your Engineering Operations Pass the R&D 4-Part Test?

Most engineering firms aren’t pioneering new designs. However, under current tax law guidelines, qualification has been expanded beyond revolutionary designs to include improvement across specific eligible business components, as long as a corporate activity passes a 4-part test. An eligible research and development activity must:

  1. Be grounded in the hard sciences: Engineering, computer science, biology or chemistry.
  2. Develop or improve: function, performance, reliability, quality or durability.
  3. Explore what was not known at the start of the project:
    • Capability uncertainty – Can we design it?
    • Methodology uncertainty – How do we design it?
    • Design uncertainty – What is the appropriate design?
  4. Eliminate uncertainties in #3
    • Evaluate one or more alternatives
    • Perform testing or modeling
    • Examine and analyze hypothesis

Benefit Breakdown

Let’s say you spent the following costs in your development:

Design Payroll Costs:  $500,000

Your Federal R&D tax credit would be: $39,500

You can also go back and amend 3 open years.


Acena, a specialist in the R&D law, bridges the gap between the qualified activities and the associated costs.

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R&D Tax Credit in Action

Client Testimonial

"Acena Consulting has a professional and knowledgeable team that work very efficiently to deliver results. The format for interviews is well thought out and documented which makes the interview process easy for our engineers. The report at the end is professionally presented and provides the thoughtful documentation required to support the R&D tax credit deduction."

-CFO, Mechanical Design and Engineering Co.

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