R&D Tax Credits for Your Business: What Qualifies?

Entrepreneurs spend their days solving problems that don’t yet have an obvious answer. You might be refining a product to make it work as intended or reworking a process to make it more efficient. Much of this routine problem-solving already meets the tax code’s definition of research and development (R&D) and could qualify for the federal R&D tax credit.

Under the 2025 One Big Beautiful Bill Act (OBBBA), U.S.-based research can once again be deducted in full the year it’s incurred, rather than spread out over several years, making the credit significantly more valuable.

Many business owners assume the credit was written for someone else. Others may already be doing qualifying work, but don’t capture it in a way that lets them claim it. CLA (CliftonLarsonAllen LLP), one of the largest accounting and professional services firms in the country, works with entrepreneurs to identify where every day problem-solving becomes qualifying research and to help document it as the IRS requires.

What the credit covers

When people hear the term R&D tax credit, they tend to picture lab coats and beakers, but that’s a narrow slice of what qualifies. Julie Helms, a technical director in CLA’s federal tax strategies group who leads its R&D credit practice, says the credit covers a much wider range of work: testing a new product design, refining a manufacturing process, building or improving software, even experimenting with new techniques on a farm.

What matters is whether a company is working through technical uncertainty and testing its way toward a solution. Heavy manufacturing, technology, engineering, and construction all show up regularly in Helms’s practice, and agriculture has become one of the fastest-growing areas of her work.

“If you’re not evolving, you’re dying,” Helms says, describing how much of that experimentation is really just businesses trying to keep up.

Michael DePrima, who leads CLA’s federal tax strategies group, says the breadth of the credit is by design. The credit was written in 1981 as a broad incentive for American companies to keep innovating, not a narrow one aimed at scientists in labs. “It’s an incentive for U.S. innovation,” he says.

The misconception that’s costing entrepreneurs the most

For small and growing companies, Helms sees qualifying activity nearly everywhere, since so much of the day goes into working out whether an idea can even be built. The most common misunderstanding she meets is timing. Founders assume the credit only helps in a year when the company owes income tax, which leaves early-stage businesses wondering why they would pay for a study before turning a profit.

A startup doesn’t have to wait for profitability to see the benefit. Startup companies could potentially apply the credit against its payroll taxes for an immediate return, and any unused portion carries forward for up to 20 years. “It’s a really great planning tool, even if you can’t use it right now,” Helms says, since founders can build up credits early and draw on them once the business becomes profitable.

DePrima works with many companies at exactly this stage, and it’s some of his favorite work. “Being able to help them from a tax savings standpoint to reinvest some of that back into their business is huge,” he says. Helms and DePrima add that a business need not be first to market; a product much like one already on the market can still qualify when your version carries a different edge.

Where qualifying work is showing up now

The credit is largely industry agnostic, and the biggest technology companies now claim billions as AI and data-center investment accelerates.

Agriculture is the clearest recent example of it reaching a place few expected. A February 2026 Tax Court decision, George v. Commissioner, recognized experimentation to improve poultry production could qualify as research, reshaping how CLA approaches an entire industry.

“The case opened up the agriculture industry in a way that I hadn’t seen before,” Helms says. The court allowed the credit only where the work was well documented, a lesson for every claim. As Helms puts it, “It’s hard pressed to find an industry or a company that’s not doing some sort of R&D.”

What changed with the cost of your research

While the credit itself has changed little in recent years, the bigger shifts have landed on how businesses account for their research spending, and the past few years have brought some strain for many companies. Helms walks clients through the history: the Tax Cuts and Jobs Act included a provision, known as Section 174, effective in 2022, requiring companies to capitalize their research costs and spread the deduction over 5 years for domestic work and 15 years for offshore work. Businesses that used to expense those costs saw their taxable income climb through 2023 and 2024.

In 2025, the law reversed course for domestic research. Companies can once again expense their U.S. research costs in the year they incur them, with catch-up provisions to recover deductions they were forced to defer. Foreign research must still be amortized over 15 years and remains ineligible for the credit, which raises the stakes of moving development work overseas.

Considerable confusion surrounded a deadline this year, when the law gave small business taxpayers with gross receipts under $31 million until July 6, 2026, to amend their 2022 through 2024 returns and treat the earlier capitalization rules as though they had never applied. Helms describes the window this way: “That July 6th date gave those small business taxpayers a time machine, if they wanted to hop in it and go back and say, this never happened,” she says. For most clients, amending wasn’t the most advantageous move. Owners who missed the date still have a path to the credit, since R&D credit claims can be amended while the statute of limitations remains open, usually three years, separate from the July 6 election.

More documentation is on the way

The IRS has spent years preparing a change to Form 6765, the form used to claim the credit, and it signals where the agency is heading. A new section asks filers to identify their business components and explain what technical problem each project set out to solve and how they experimented toward an answer. These questions mirror the information requests the IRS already issues during an examination, Helms notes, so the agency now wants an early roadmap of every claim, down to the reasoning behind each figure.

“Companies that already keep good records have an upside here,” Helms says, since “it’s documentation that you should have anyway.” Assembling it, as the IRS now expects, takes more effort than filing once did, so CLA has been preparing clients by making sure the documentation is in hand and matches what the new form requires.

Choosing the right advisor

How much value a business captures depends heavily on who helps it file. DePrima has watched the field fill with firms overselling the opportunity. “There have been quite a few boutique firms that have popped up over the years that might get you an answer that sounds great when they’re trying to sell you the credit,” he says, and the number that impressed during the pitch often shrinks once the claim reaches the IRS. He has seen companies sitting on millions in credits they cannot use, and a good advisor will sometimes tell a client not to claim a credit that they will not use for another 10 years.

Helms offers a parallel caution about speed, since an amended refund claim rarely moves quickly. The IRS now requires documentation up front and can take 18 months to two years to respond. “Patience is important if we’re talking refund claims,” she says.

For business owners who suspect they qualify, the advice is simple. “The first step would be to have a conversation,” Helms says, looking honestly at what the company is doing and how well the work is documented today. From there, it turns to the effort and risk a claim entails, and to where the owner expects the business to go.

For DePrima, choosing the right advisor comes down to one thing. “There’s no substitute for working with a reputable R&D tax credit provider early on,” he says. CLA weighs a company’s full financial and operational picture and gives founders a realistic assessment of whether a claim is worth pursuing, one more way to help entrepreneurs put their own money back into the business they’re building.

Click here to find out how CLA can help your business obtain the R&D tax credit and much more.