Inflation Reduction Act and the R&D Tax Credit

With the Inflation Reduction Act of 2022 officially signed into law by President Biden, it’s time to look into the impacts of the act on the R&D tax credit. The legislation was drafted with a focus on government spending programs designed to impact climate change but a variety of tax provisions were contained as well.

The act increases the maximum amount a qualified small business can elect to claim as a payroll tax credit from $250,000 to $500,000 beginning after Dec. 31, 2022. While this may seem like a great move for these small businesses, it’s likely that very few will see any change in their credit. This is simply because of the way the credit is calculated.

The tax credit is calculated based on the amount of R&D spent by the company and most early-stage startups do not spend enough to capture $250,000 worth of a credit in the first place. On the bright side, there is no downside to this increase in the maximized credit limit. All companies eligible for the credit remain eligible and those who have been limited by the cap out in the past will only benefit. With this in mind, the Act doesn’t really double the R&D tax credit for most startups, but could still be a welcome benefit for some.

Are you developing new technology for an existing application? Did you know your development work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? Even if your development isn’t successful your work may still qualify for R&D credits (i.e. you don’t need to have a patent to qualify). To find out more, please contact a Swanson Reed R&D Specialist today or check out our free online eligibility test.

Who We Are:

Swanson Reed is one of the U.S.’ largest Specialist R&D tax advisory firms. We manage all facets of the R&D tax credit program, from claim preparation and audit compliance to claim disputes.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at or contact your usual Swanson Reed representative.

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