The federal R&D tax credit, explained
A plain-English primer on the Section 41 R&D tax credit — who qualifies, what counts as a qualified research expense, and how the four-part test works. PLACEHOLDER content.
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The federal R&D tax credit under Section 41 of the Internal Revenue Code rewards companies that invest in developing or improving products, processes, software, or techniques in the United States.
Who qualifies
Companies of almost any size and industry can qualify — not just labs and hardware firms. Software teams, manufacturers, and engineering-heavy startups frequently leave this credit on the table.
The four-part test
To count as qualified research, an activity must satisfy all four:
- Permitted purpose — developing or improving a business component.
- Technological in nature — relies on the hard sciences.
- Elimination of uncertainty — resolves uncertainty about capability, method, or design.
- Process of experimentation — evaluates alternatives through testing.
Qualified research expenses (QREs)
The credit is computed on QREs, which generally include:
- Wages for employees performing, supervising, or supporting research.
- Supplies consumed in the research process.
- Contract research (typically 65% of amounts paid to US contractors).
- Cloud/compute costs used for qualified development.
How ClaimKit helps
ClaimKit drafts your technical narrative and QRE schedules from the evidence you already generate, then an R&D tax credit expert reviews everything before it's delivered filing-ready for your return.