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R&D Tax Credit (§41) + §174 Workaround

Software/product dev = 6–10% dollar-for-dollar credit.

Overview

The R&D credit (§41) rewards qualifying research activities with a 6–10% credit on wages, contractors, and supplies. Startups can offset up to $500K/yr of payroll tax. Post-TCJA §174 forces 5-yr amortization of R&D — proper §41 stacking recovers most of the sting. Massively underclaimed by SaaS, biotech, engineering firms.

Best fit
SaaS/software companiesBiotech/hardware startupsEngineering firms
Estimated impact
$50K–$500K+ per year for qualifying R&D spend

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