Filing for IP? You Might Qualify for R&D Tax Credits

‍Patents Signal Innovation and the IRS Rewards That

Filing for intellectual property (IP), such as a utility or design patent, often requires significant research, experimentation, and technical development. These same activities can qualify your business for the Research and Development (R&D) Tax Credit, one of the most valuable government incentives available to innovative companies.

Whether you’re a startup filing your first patent or a mature business with a growing IP portfolio, it’s worth exploring how R&D tax credits can reduce your tax liability or increase your cash flow.

Why Filing for IP Is a Strong Signal of R&D Activity

Patents and R&D go hand in hand. To file a patent, a company usually engages in:

• Designing or testing a novel product or process
• Evaluating different technical approaches
• Creating software with unique functionality
• Conducting experiments or modeling scenarios
• Solving technical challenges that do not have an obvious solution

These are precisely the kinds of activities that the IRS considers Qualified Research Activities (QRAs) under IRC Section 41. If you’re doing these things, you’re likely eligible to claim the credit, whether or not your patent is ultimately approved.

What Costs Can Be Claimed?

Filing for IP may unlock credit opportunities for related Qualified Research Expenses (QREs), including:

• Wages of engineers, designers, developers, or technical staff working on the project
• US-based contractor costs for outsourced development, design, or modeling
• Supplies and materials used in prototyping or testing
• Cloud computing and software development environments

If your team contributed to the development of a patentable technology, many of these expenses may be eligible.

Don’t Miss State-Level Credits

In addition to the federal R&D tax credit, many states offer their own incentive programs. States like California, Texas, New York, Arizona, and Massachusetts offer R&D credits with varying formulas.

State-level programs can often be combined with federal credits for stacked benefits. Depending on where your team is located, you could be leaving thousands in additional savings on the table.

Startups Can Use R&D Credits to Offset Payroll Taxes

Even if your company is pre-revenue or not yet profitable, you may still benefit. Startups that meet certain criteria (gross receipts under $5M, incorporated within the last five years) can apply the federal R&D credit against payroll taxes, reducing burn rate and extending runway.

Patent = R&D, But Not All R&D Requires a Patent

Important note: while a patent is a strong signal of R&D, you do not need to file for IP in order to claim R&D tax credits. In fact, many eligible companies never file patents at all. The credit is based on your technical activities and experimentation, not legal filings.

However, if you are filing for IP, you likely have strong documentation and proof of technical uncertainty, which makes it easier to build a credible, audit-ready R&D claim.

How to Claim the Credit

Here’s what you’ll need to do:

1. Identify qualified projects linked to your IP development
2. Calculate eligible expenses for wages, contractors, materials, and cloud tools
3. Document your activities to withstand audit scrutiny
4. File IRS Form 6765 (for federal) and the corresponding state forms

A specialized partner like TaxTaker can guide you through each step and help maximize your claim.

Need Help Turning IP Into Tax Savings?

If you're filing for a patent or investing in technical innovation, you’re likely leaving money on the table. TaxTaker helps startups and growth-stage companies uncover hidden R&D credits tied to product development, software, prototyping, and yes, IP.

Book a free call to see how much you could save.