The R&D tax credit is a federal incentive open to all U.S. businesses conducting R&D, letting you recover funds to reinvest in your operations.
Architecture firms often wonder if their R&D activities and costs are eligible for the tax credit. The IRS has published clear guidelines on what qualifies as research activities and expenses. Plus, architects can now use automated tools to streamline the claims process and ensure they don’t miss out on money they deserve.
Qualifying R&D Activities and Job Titles
If your architecture firm carries out any of the following activities, you could qualify for the federal R&D tax credit:
- Investigating new materials to boost energy efficiency
- Exploring alternative design solutions
- Implementing building information modeling
- Researching structural design
You may also qualify for R&D tax credits for architects if your team includes:
- Project architects
- Designers
- Drafters
To be certain your R&D activities qualify for the tax credit, review the IRS guidelines that outline which expenses and activities are eligible.
IRS Guidelines for R&D Tax Credits
Architecture firms can find all the details on qualifying for R&D tax credits in Section 41 on the IRS website.
To qualify for the R&D tax credit, your company must meet all four parts of the eligibility test:
- The Section 174 test: All expenses must be R&D costs in an “experimental or laboratory sense” and directly related to your business.
- The discovering technological information test: Your research must aim to resolve uncertainty about improving or developing a business component. The process must involve computer science, biological or physical sciences, or engineering, as defined by the IRS.
- The business component test: Your research should focus on creating or improving a business component—such as a product, software, formula, process, invention, or technique.
- The process of experimentation test: Your research must 1) identify uncertainty about improving or developing a business component, 2) propose at least one alternative to resolve that uncertainty, and 3) evaluate those alternatives through a systematic process.
The IRS also specifies which research expenses count toward the R&D tax credit. Qualified research expenses include:
- Employee wages: Salaries paid to employees who directly perform, supervise, or support qualified research activities.
- Supplies: Any tangible property used in qualified research.
- Contract research expenses: Sixty-five percent of the costs paid to non-employees for qualified research activities.
The IRS also lists activities that are excluded from the R&D tax credit:
- Research conducted after commercial production has started
- Customizing a business component for a specific client
- Duplicating existing products or processes
- Research, studies, or surveys related to management functions
- Internal-use software
- Research performed outside the U.S., Puerto Rico, or other U.S. territories
- Research in the social sciences
- Research funded by grants, contracts, or third parties
Maximize Your Tax Credit Claims with Boast
With Boast, you no longer need to spend valuable time and resources on the R&D tax credit process—our platform handles it for you. Our AI-powered solution, BoastClaim, automatically collects data from your systems and identifies eligible research activities and expenses. On average, we help clients increase their tax claims by 15% and save 60 hours each year, so you can focus on what matters most for your business.
Download our ultimate guide to R&D tax credits (or SR&ED for Canadian businesses) to get everything you need to qualify for R&D tax credits.
