Tax in Action: Practical Strategies for Tax Pros

Cracking the R&D Tax Credit Code: Section 41 Explained

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The R&D tax credit offers significant tax-saving potential, yet remains misunderstood by many small business owners and their advisors. Jeremy breaks down the key components of the Section 41 credit, explaining qualified research activities, eligible expenses, and calculation methods. Small service-based businesses might qualify more often than they realize, especially when research activities relate to technological innovation, computer science, or engineering processes.

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  • (00:00) - Introduction to the R&D Credit
  • (03:00) - Components of the R&D Credit
  • (06:00) - Defining Qualified Research
  • (13:00) - Business Components and the Shrinking Back Rule
  • (21:35) - Non-Qualifying Research Activities
  • (25:35) - Internal Software and the High Threshold of Innovation Test
  • (30:35) - Calculating the R&D Credit
  • (33:35) - Qualifying Wages and Expenses
  • (39:35) - Contract Research Expenses
  • (44:35) - Credit Calculation Methods
  • (50:35) - Payroll Tax Election for Startups
  • (52:35) - Interaction with IRC Section 174
  • (54:35) - Special Rules for Partnerships
  • (57:35) - Common Myths and Final Thoughts

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    Tax in Action: Practical Strategies for Tax ProsBy Jeremy Wells, EA, CPA
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