R&D Tax Credits

What industries qualify for the R&D tax credit?

Any industry can qualify for the R&D tax credit if its activities meet the IRS four-part test for qualified research. Eligibility is based on the nature of the work performed rather than the industry classification of the business.

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Expanded Answer

Which businesses are eligible for R&D tax credits?

The R&D tax credit applies broadly across industries as long as the underlying activities meet the IRS four-part test: permitted purpose, technological in nature, elimination of uncertainty, and process of experimentation. This means that eligibility is determined by how work is performed, not the type of business conducting it.

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Industries such as software development, manufacturing, engineering, construction, and life sciences frequently qualify because they involve iterative design, performance improvement, and technical problem solving. Many companies outside traditional research sectors are eligible because their operations inherently involve experimentation and technical advancement. Source: 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 different industries qualifying for the R&D tax credit

A manufacturing company tests new production methods to improve efficiency, while a construction firm develops systems to meet energy performance standards. At the same time, a software company builds new features and improves platform scalability.

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Although these companies operate in different industries, they all perform work that meets the IRS definition of qualified research, making them eligible for the credit.

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

Applying the IRS four-part test to evaluate project eligibility across departments

Identifying areas of technical uncertainty within business operations

Documenting iterative development, testing, and experimentation processes

Improving products, processes, or systems through engineering-driven work

Evaluating cross-functional activities involving design, engineering, or technical problem solving

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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