How the R&D credit applies to construction companies and contractors

The federal R&D tax credit rewards work that tries to improve a product or process through engineering and testing. In construction that usually means more than following the plans: developing a new building method, solving an engineering problem on a custom project or building a prefabricated system. Most of it is never called research.

Florida contractors and builders claim the credit on their federal returns. Many are S corporations or LLCs, so the credit passes through to the owners, and your CPA files it with the return.

Work that often qualifies

• Developing a new or improved building method, system or assembly

• Engineering a custom solution where no standard approach worked

• Designing and testing prefabricated components or modular systems

• Testing new materials or products in real conditions

• Developing tools, equipment or processes that make the work faster or safer

Work that usually does not

• Routine construction that follows the plans and specifications

• Standard installations and repairs

• Project management, scheduling and estimating

• Cosmetic or style choices

Costs that count

Wages for engineers, designers and skilled crews doing the development work count, along with supplies used in testing and prototypes, and a share of what you pay outside contractors. Whether the credit applies depends on the project, so we look at each one separately. We tie each cost to a specific project so your CPA has a file that holds up if the IRS asks.

What to have ready

• A list of projects where you developed or engineered something new

• The people who worked on them and roughly how much time they spent

• Contracts and scopes showing who carried the risk

• Drawings, test notes, photos and change records from the work

You do not need all of this to start. The free screening takes 5 to 10 minutes and tells you whether a full study is worth it.

We also work with contractors outside Florida. The federal credit works the same in every state, and we run the screening remotely or in person.