Georgia R&D Credit Extremely Beneficial to Local Businesses
The Federal R&D Tax Credit can be a huge game changer for many U.S. companies, but many business don’t realize that the majority of states offer their own R&D tax credit which can be just as beneficial as the federal credit.
In fact, the credits are quite similar. Activities that qualify for the federal R&D credit can also qualify for a state level credit. Notably, the state of Georgia has one of the most taxpayer friendly R&D credits. The Georgia credit can be up to 10 percent of qualifying expenses, which, for some taxpayers, is a better benefit than the federal credit. However, the benefit of the Georgia credit doesn’t stop there. For companies that don’t have any Georgia income tax liability, an election can be made to utilize the credit against Georgia payroll tax withholding.
Many taxpayers underestimate the state credit and aren’t completely aware of why it is so beneficial. Essentially, the withholding benefit allows companies to monetize the credit. To illustrate, rather than remitting withholding payments to the state each payroll cycle, the company uses the credit against the withholding amount and keeps the “cash” instead. For further benefit, the credit doesn’t expire, and it can be used each payroll cycle until all of the credit has been utilized, resulting in some companies’ “eliminating” the state payroll tax withholding payment for the entire year.
The state R&D credit is often overlooked, but shouldn’t be ignored. The varying state credits should be considered if looking to relocate a company or if an expansion is planned. In some states, even a move to a different county within the same state could result in a difference in state R&D credit available.