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FAQs About the Research Credit

Companies that engage in research and development activities may qualify for a federal tax credit for some of those expenses. The credit is complicated to calculate, and not all research activities are eligible — but the tax savings can be significant. Here are answers to questions you might have about this potentially lucrative tax break.

What’s it worth?

The federal research credit — sometimes referred to as the research and development (R&D) credit — is for increasing research activities. Generally, it’s equal to 20% of the amount by which qualified research expenditures (QREs) in a tax year exceed a base amount derived from your company’s historical research expenditures. (There are alternative computation methods for start-ups and other companies without sufficient historical data.) QREs include wages, supplies, and certain consulting and contract research fees related to qualified research activities.

The credit is nonrefundable — that is, it can’t be used to generate a loss — but unused credits may be carried back one year or forward up to 20 years. Limits on general business credits also prevent companies from using tax credits to erase their tax liability entirely.

In addition, start-ups may elect to offset research credits […]

By Linkenheimer LLP|2026-04-09T18:17:26+00:00April 9th, 2026|credit, research credit|0 Comments

Act soon: The OBBBA Ends Clean Energy Tax Breaks

The newly enacted One, Big, Beautiful Bill Act (OBBBA) represents a major move by President Trump and congressional Republicans to roll back a number of clean energy tax incentives originally introduced or expanded under the Inflation Reduction Act (IRA). Below is a summary of the key individual tax credits that will soon be scaled back or eliminated.

Clean vehicle tax credits

If you’re planning to buy a clean vehicle, consider acting soon to take advantage of expiring tax benefits:

New clean vehicle credit. This credit offers up to $7,500 for qualifying new electric and fuel cell vehicles, depending on how the battery components and critical minerals are sourced. Vehicles that meet only one of the sourcing criteria may be eligible for a reduced $3,750 credit. Originally set to expire in 2032, this credit now ends on September 30, 2025.

The maximum manufacturer’s suggested retail price is $55,000 for cars and $80,000 for SUVs, trucks and vans. To qualify, your adjusted gross income (AGI) must not exceed $150,000 ($300,000 for married couples filing jointly and $225,000 for heads of households).

Used clean vehicle credit. Buyers of eligible used EVs or fuel cell vehicles may claim up to […]

By Linkenheimer LLP|2025-08-13T12:44:20+00:00August 13th, 2025|credit, energy, EV, New Tax Laws, News|0 Comments

Better Tax Break When Applying the Research Credit Against Payroll Taxes

The credit for increasing research activities, often referred to as the research and development (R&D) credit, is a valuable tax break available to certain eligible small businesses. Claiming the credit involves complex calculations, which we’ll take care of for you.

But in addition to the credit itself, be aware that there are two additional features that are especially favorable to small businesses:

Eligible small businesses ($50 million or less in gross receipts for the three prior tax years) may claim the credit against alternative minimum tax (AMT) liability.
The credit can be used by certain smaller startup businesses against their Social Security payroll and Medicare tax liability.

Let’s take a look at the second feature. The Inflation Reduction Act (IRA) has doubled the amount of the payroll tax credit election for qualified businesses and made a change to the eligible types of payroll taxes it can be applied to, making it better than it was before the law changes kicked in.

Election basics

Subject to limits, your business can elect to apply all or some of any research tax credit that you earn against your payroll taxes instead of your income tax. This payroll tax election may […]

By Linkenheimer LLP|2024-03-04T19:16:00+00:00March 4th, 2024|credit, research credit|0 Comments

Applying for a Commercial Loan with Confidence

Few and far between are businesses that can either launch or grow without an infusion of outside capital. In some cases, that capital comes in the form of a commercial loan from a bank or some other type of lender.

If you and your company’s leadership team believe a loan will soon be necessary, it’s important to approach the endeavor with confidence. That starts with having valid, well-considered strategic reasons for borrowing. From there, you need to engage your bank or a prospective lender with a strong air of professionalism and certainty.

Essential questions

First, familiarize yourself with how the process works. It’s essentially built on four basic questions:

How much money do you want?
How do you plan to use the loan proceeds?
When do you need the funds?
How soon can you repay the loan?

Your loan officer will also likely ask about your business’s previous sources of financing. So, be ready to explain how you’ve financed your company to date. Methods may include personal cash infusions, forgone salaries and sweat equity, as well as any equity contributions from friends, family members and outside investors.

Loan products

As you’re probably aware, banks and lenders offer a […]

By Linkenheimer LLP|2024-02-28T18:26:29+00:00February 28th, 2024|business, credit|0 Comments

Take Advantage of the Rehabilitation Tax Credit When Altering or Adding to Business Space

If your business occupies substantial space and needs to increase or move from that space in the future, you should keep the rehabilitation tax credit in mind. This is especially true if you favor historic buildings.

The credit is equal to 20% of the qualified rehabilitation expenditures (QREs) for a qualified rehabilitated building that’s also a certified historic structure. A qualified rehabilitated building is a depreciable building that has been placed in service before the beginning of the rehabilitation and is used, after rehabilitation, in business or for the production of income (and not held primarily for sale). Additionally, the building must be “substantially” rehabilitated, which generally requires that the QREs for the rehabilitation exceed the greater of $5,000 or the adjusted basis of the existing building.

A QRE is any amount chargeable to capital and incurred in connection with the rehabilitation (including reconstruction) of a qualified rehabilitated building. QREs must be for real property (but not land) and can’t include building enlargement or acquisition costs.

The 20% credit is allocated ratably to each year in the five-year period beginning in the tax year in which the qualified rehabilitated building is placed in service. Thus, […]

By Linkenheimer LLP|2023-04-17T17:58:43+00:00April 17th, 2023|credit, tcja|0 Comments