How the R&D credit applies to manufacturers

The federal R&D tax credit rewards work that tries to improve a product or a process through engineering and testing. Manufacturers do this constantly: new parts, new tooling, faster or cleaner production methods. Most of it never gets called research, and it happens on the shop floor as much as in an engineering office.

Florida manufacturers 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

• Designing a new product or improving an existing one

• Developing or changing tooling, fixtures and molds

• Improving a production process for speed, quality or yield

• Building and testing prototypes, including ones that failed

• Introducing new materials or automation and working through the problems

Work that usually does not

• Routine production once the process is settled

• Copying an existing product without technical uncertainty

• Quality checks and inspections that follow a fixed procedure

Costs that count

Wages for the engineers, machinists and technicians doing the work, supplies used in testing and prototypes, and a share of what you pay outside contractors can count toward the credit. 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 products, tooling or process changes from the last few years

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

• Supply and contractor costs tied to those projects

• Any drawings, test records or notes 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 manufacturers outside Florida. The federal credit works the same in every state, and we run the screening remotely or in person.