Many business owners dedicate their time and energy to improving their products or service. Staying on the cutting edge of whatever industry you’re in isn’t free, though. It costs money. But did you know you could earn back your expenses with an Iowa R&D tax credit?
It’s true – Iowa offers incentives to businesses that invest in research and development, just as many other states do. You may even be entitled to these tax credits already without even knowing it!
But, what does the Iowa research and development tax credit entail? How much can you get back? And, does your business technically qualify?
Today, we’re going to cover all this and more. Keep reading to learn everything you need to know about getting back your R&D investment in the state of Iowa.
Does Iowa Have An R&D Tax Credit?
Your first question is probably – does Iowa have an R&D tax credit? By now you know the answer is yes – they do. And, it’s actually a pretty good one. It’s well worth your time and energy to look into recapturing the capital you invested in previous years. This tax credit is available to corporations, LLCs, and even partnerships. And contrary to popular belief, these tax credits aren’t just for the big companies – even small to medium-sized businesses can benefit from these incentives.
So, what do you stand to gain from this tax credit? It depends on the method you choose to calculate. The typical approach is as follows:
The Iowa R&D tax credit is just about 6.5% of increased research expenditures and 6.5% of basic research expenses. The expenses must have been conducted within the state of Iowa to qualify. Or, you can go for a more simplified method – which would entitle you to 4.55% of the difference between your current year’s QREs (qualifying research expenditures) and 50% of the average of the prior 3 years.
Which Industries Can Earn The Tax Credit?
Unlike most states, there are a few specific industries that have access to this tax credit – and a few industries that are not permitted to earn back the tax credit. Iowa offers a manufacturing R&D tax credit, along with a software engineering R&D tax credit. These are the two most common, but there are a few others – such as life sciences ( agriculture, biology, botany, zoology, biochemistry, etc.) and aviation/aerospace (aircraft, spacecraft, and military).
And, just as there are specific industries that can benefit from this tax credit – there are a few specific industries that cannot. These include:
- Financial services
- Retail transportation
If you don’t fall within one of these 6 prohibited industries, there is a good chance you qualify – but what specific activities do you need to have invested in? Let’s take a look.
What Types Of Activities Qualify For The Iowa R&D Tax Credit?
The best part about the Iowa R&D tax credit? There is a wide range of activities that qualify! From simply testing new materials for your product to enhancing certain elements of the product – to improving manufacturing practices implementing new software. There are so many things that qualify that instead of listing them all out, it is better to ask yourself a few simple questions:
- Did you pay designers, engineers, or scientists for their help?
- Did you invest in patents, prototypes, or software?
- Did you dedicate time/money to improving your existing offerings?
- Did you dedicate time/money to offering new products/services?
If you answered yes to one or more of these questions, there is a very good chance you qualify for the Iowa research and development tax credit. What next?
How To Get Your Iowa Research and Development Tax Credit Quick and Easy
Getting your Iowa research and development tax credit isn’t as hard as it seems. You’ll fill out form IA 128 and provide it along with your Iowa tax return. But, if you want to make sure you get this done right – and earn back what you’re truly owed – let the professionals here at The Tier Group help you out.
We’re proud to be known as the small business owner’s secret weapon when tax season rolls around. We can help you fight on a level playing field by earning the same incentives the huge corporations in your state do. Our specialized roster of tax professionals can quickly and easily identify opportunities for you to recapture expenditures. With an average recapture rate of $104k, it’s safe to say this is worth your time and energy.
But the best part? It all starts with a free consultation. We’ll learn more about your business, where you stand to gain back investment, and see to it that you get what you’re owed. Book a call today and get the process started for free – you’ve got nothing to lose, and a whole lot to gain.