R&D Tax Credits for Startups
Written by Aparna Devalla
Curated by Rubric Financial
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What Qualifies as R&D for Tax Purposes
- The federal R&D tax credit (IRC Section 41) covers activities that develop new or improved products, processes, software, or technologies.
- Qualifying activities include developing new software features, designing prototypes, building proprietary algorithms, and improving manufacturing processes.
- The work must involve the elimination of technical uncertainty through a process of experimentation, not just routine development.
- Both successful and unsuccessful R&D efforts qualify, as long as the activities meet the four-part test.
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About the author
Aparna DevallaCPAHead of Tax & Accounting
CPA and Head of Tax & Accounting at StartupCFO. Specializes in multi-state tax compliance, R&D credits, and GAAP-compliant books for venture-backed startups.
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