Qualifying Expenditures For The R&D Tax Credit

Qualifying Expenditures For The R&D Tax Credit

Qualifying expenditures for the R&D tax credit include salary and wages, supply costs, computer rental or lease, and contractor costs.

Salary & Wages

There are generally three categories of employees performing research:

Supply Costs

If you are prototyping and testing materials, the cost of those materials can be included. For example, the materials associated with prototype builds are research costs as are the costs of materials used in the evaluation of new formulations of beauty products can be included as supply costs.

Computer Rental or Lease

Claiming expenditures for computer rentals or lease costs are becoming more prevalent with software development companies needing to run complicated research algorithms and testing techniques. These expenditures are often in the form of the costs associated with cloud storage that’s specifically dedicated to research activities.


When non-employees perform research, often those are qualified contractor costs.  You can include contractors/outside resources that you hire as long as those resources are directly associated with your research activities. For instance, if you need to hire a specialist with electrical engineering expertise, you can include 65% of those expenditures for research activities for outside researchers.

How Source Advisors Can Help

Our team at Source Advisors can help your business reduce federal income tax and maximize your tax benefits through the R&D tax credit. If you have paid for or incurred qualified research expenses while conducting qualified research activities, you are eligible for this tax credit.

Have a tax question? Contact Rachel Bishop

Or Reach Out To Eric Larson for immediate needs.

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