R&D Tax Credits

Can R&D credits expire?

Federal R&D credits can be carried forward for up to 20 years and carried back 1 year. They don't expire during the carryforward period. Unused credits also increase company value and are treated as assets in M&A transactions, often valued more favorably than NOLs.

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

Expanded Answer

How long can R&D tax credits be carried forward?

Unused R&D Tax Credits do not disappear immediately, but they are subject to carry-forward and carry-back rules.

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Carry-forward: Unused R&D credits can be carried forward for up to 20 years.

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Carry-back: Credits may be carried back 1 year to offset prior-year tax liabilityPayroll tax offset credits for startups are applied quarterly and do not carry forward in the same way, they must be applied in the eligible tax yearIt is important to track unused credits year over year and work with a tax advisor to ensure they are properly applied before expiration.IRS credit carry-forward rules: https://www.irs.gov/instructions/i3800

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 managing unused R&D tax credits

A profitable company generates more R&D credits than it can use in a single year. Instead of losing those credits, it carries them forward to offset future tax liability.

By tracking these credits over time and applying them strategically, the company ensures it captures the full benefit before they expire under the applicable carryforward rules.

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

Profitable companies generating more credits than they use

Businesses carrying credits forward across multiple years

Companies planning long-term tax strategies

Organizations tracking unused credits year over year

Firms optimizing timing of credit utilization

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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