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Software Development R&D Tax Credits

Research & Development Tax Credit for the Software Development Industry

Each year, countless software companies miss out on the potentially lucrative research and development tax credits, despite the significant amount of R&D effort required to design software. Many software developers assume scientists in white coats are needed to qualify as discovering or creating something “revolutionary.” Not true. Qualifying development only has to be new to you. A patent isn’t necessary.

Does Your Software Development Company Have Eligible R&D Operations?

To qualify for the R&D tax credit, your software development firm simply has to use U.S. labor. If you’re performing this technical work in the U.S., you can monetize your development activities in the form of tax credits.

Qualified Activities May Include:
  • Programming software source code
  • Compiling and testing source code
  • Designing and developing the software
  • Developing new or improved technologies
  • Evaluating and establishing functional specifications

Benefit Breakdown

An example of the innovation tax credit benefit includes:

Labor: $500,000
Contractor: $200,000

Your Federal R&D tax credit would be: $55,000

The innovation tax credit allows taxpayers to go back and amend 3 open years. Additionally, many states offer this incentive, allowing some companies to double their benefit. You can go back and amend up to 4 years in some states.


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’s approach and technical knowledge of the tax code at both a state and federal level have been outstanding both during our annual R&D tax credit analysis and last year’s IRS audit. Acena gave us the data tools we needed to develop processes to make our collection and accounting for R&D expenses more thorough and robust.”

- B. L., CEO, Los Angeles, software and systems development company

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