Blog | Tax Credits | Veritax Advisors

Use the R&D Credit to Offset Payroll Taxes

Written by A. Chris Ostler CPA | Oct 25, 2022 6:00:00 AM

The R&D credit program was permanently extended as part of the Protecting Americans from Tax Hikes Act of 2015. It contains many significant enhancements starting in 2016, including offsets to the alternative minimum tax and payroll tax for eligible businesses.

The R&D credit program is still based on credit-eligible R&D expenses, but payroll tax offsets apply only to those expenses incurred beginning in 2016. The new payroll tax offset allows companies to receive a benefit for their research and development activities regardless of whether they are profitable.

  • The new payroll tax offset is available exclusively to companies that have:
  • Gross receipts for five years or less
  • Less than $5 million in gross receipts
  • Qualifying research activities and expenditure

The maximum benefit an eligible company is allowed to claim against payroll taxes in 2021 is $250,000.

If your company meets the criteria for this payroll tax offset, you should consult an R&D professional who can help you understand how to start tracking your R&D activities to take maximum advantage of this program.