New data reveals strategic AI spending patterns among innovative businesses and significant opportunities to recover innovation capital.

Mid-market companies are making substantial investments in artificial intelligence, with average spending exceeding $600,000 in 2025, according to Baker Tilly's newly released 2026 Mid-Market Report. For businesses investing heavily in technology innovation, these findings highlight both the competitive landscape and a critical question: Are you maximizing R&D tax credits on these investments?

AI Investment Reaches Critical Mass

The report surveyed 500 business leaders from companies with $200 million to $2 billion in annual revenue, revealing that 59% identify technology adoption as central to their current business strategy. Among those investing in AI, spending ranged from $500,000 to over $1 million, with the average investment landing at approximately $600,000.

This substantial capital deployment reflects how mid-market companies view AI; not as experimental technology, but as essential infrastructure for remaining competitive during economic uncertainty.

What Companies Are Using AI For

Mid-market leaders are deploying AI across core business functions:

  • 76% are using AI to improve efficiencies and incorporate automation
  • 60% aim to reduce rising overhead costs
  • 62% recognize AI as critical for attracting qualified talent
  • 57% leverage AI to analyze data for better business insights
  • 50% view AI investment as necessary to stay competitive

Investment priorities reveal a strategic approach: 70% of AI spending goes toward educating employees on external AI tools within internal guidelines, while 55% are investing in consultants to determine optimal AI usage.

The R&D Tax Credit Connection

Here's what many CFOs and business leaders overlook: Substantial AI investments like these often qualify for significant R&D tax credits at both federal and state levels.

Whether you're developing proprietary AI tools, integrating AI into existing products, or creating novel applications of AI technology, these activities typically meet the criteria for R&D tax credit eligibility:

  • Technological uncertainty: Developing or implementing AI solutions that require experimentation
  • Process of experimentation: Testing, prototyping, and refining AI models or applications
  • Technological in nature: Relying on principles of computer science, data science, or engineering
  • Qualified purpose: Creating new or improved products, processes, or software

The One Big Beautiful Bill Act, which restored immediate R&D expensing in 2025, makes these credits even more valuable for companies investing in innovation.

Economic Uncertainty Drives Innovation

Despite concerns about tariffs (35%), tax and regulatory changes (34%), and rising inflation (97% report concern), mid-market leaders remain remarkably confident. Nearly all respondents (97%) feel assured of their company's ability to navigate the current economic climate, with 96% confident in handling uncertainty.

This optimism is paired with strategic action. Companies are combating increased overhead costs through:

  • Technology investment (59%)
  • Improving customer experience (55%)
  • Increasing internal productivity and efficiency (55%)
  • Enhancing products or services (49%)
  • Creating new revenue streams (46%)

Each of these initiatives may involve qualifying R&D activities eligible for tax credits.

Recovering Innovation Capital

With mid-market companies facing multiple cost pressures—63% preparing for increased costs due to interest rates, 61% addressing tariff impacts, and 48% managing additional regulations—R&D tax credits provide a crucial mechanism for recovering innovation capital.

Boast has helped more than 2,000 businesses across North America access over $625 million in R&D tax credits. Our platform combines AI-powered automation with specialized tax expertise to identify qualifying activities, optimize claims, and provide comprehensive audit defense.

For companies investing $600,000 or more in AI and related technology initiatives, R&D tax credits can recover 25-40% more than generic approaches, freeing up capital for continued innovation.

Take Action

If your company is investing in AI, automation, product enhancement, or process innovation, you may be leaving significant tax credits unclaimed. Boast's technology-first approach streamlines the entire R&D tax credit process, from identifying qualifying activities to defending your claim during audit.

Ready to maximize your R&D tax credits? Schedule a free consultation to discover how much innovation capital your business can recover.