R&D Tax Credits

Can a pre-revenue startup claim R&D tax credits?

Yes. Qualified Small Businesses—defined as companies with under $5 million in gross receipts and fewer than 5 years of revenue—can apply up to $500,000 of R&D credits annually directly against payroll taxes (Social Security and Medicare), generating real cash savings even with zero income tax liability.

Check R&D eligibility Learn more

Trusted by companies that have claimed over $100M in incentives.

Expanded Answer

How can startups claim R&D tax credits without revenue?

Yes. Pre-revenue startups can claim the R&D Tax Credit even with no income or profits.

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Qualified early-stage companies may apply the credit against employer payroll taxes, specifically offsetting the 7.65% employer share, instead of income taxes. This allows startups to recover approximately 10% of annual R&D expenses and extend their runway while continuing to invest in product development.To qualify for the payroll tax offset, a company must:

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Have been in operation for fewer than 5 years (measured from first having gross receipts)

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Have less than $5 million in annual gross receiptsThis provision was designed specifically to help pre-profitable companies reinvest in innovation.

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Learn more: https://www.irs.gov/businesses/research-credit

What Qualifies

Activities that commonly qualify

Developing new software features or platform capabilities

Improving performance, scalability, reliability, or security

Building internal tools or technical workflows that required experimentation

Testing different technical approaches to solve engineering challenges

What Does Not Qualify

Work that usually does not qualify

Routine bug fixes with no technical uncertainty

Visual-only updates or minor design changes

Marketing, sales, and customer support work

General maintenance that did not require experimentation

Work already solved through an off-the-shelf implementation

Example Case Study

Example of a startup benefiting from the R&D tax credit

An early-stage SaaS startup is building its first product and has not yet generated revenue. The founding team and engineers spend most of their time developing features, testing infrastructure, and refining the platform.

Even without income, the company can apply the R&D tax credit against its payroll taxes. This allows it to reduce its tax burden on each payroll cycle and recover a portion of its development costs while continuing to invest in growth.

Quick takeaway

If your team had to work through technical uncertainty, there is a good chance the work deserves a closer look.

Common Industry Examples

Early-stage SaaS startups building initial product versions

AI startups developing models without revenue yet

Hardware startups prototyping and testing new designs

Biotech companies conducting early-stage research

Founding teams heavily focused on product development

Curious if you are missing out on credits?

Start with a quick eligibility check. If it looks promising, we move to a light info request and one technical interview.

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