Tax Credit for Innovation Go on--get some credit for your company's research.

If your company's research budget is growing, your federal tax refund could grow, too, with the help of a 25-year-old tax credit designed to encourage domestic innovation.

Many businesses don't realize they can use the research and experimentation credit, officially known as the Credit for Increasing Research Activities. The R&E credit can bring refunds of $100,000 or more to SMBs, says tax attorney Patricia Sweeney from the Washington, DC, law firm Miller & Chevalier.

To calculate the credit, establish a baseline year, noting your company's R&E costs. For each year thereafter, 20 percent of the increase can qualify as a tax credit, with each qualified dollar directly reducing your tax bill. To avoid losing out on some or all of your credit, be sure to document all research costs for each step of a project. In most cases, three previous years' tax forms can be refiled to add the credit if it has been overlooked.