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Manufacturing R&D Credit

For many manufacturers, the term "R&D" brings to mind a formal laboratory, but the reality is that your most valuable research and development often happens right on the shop floor. The R&D Tax Credit is designed to reward this practical, hands-on innovation.

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Eligibility is driven by the process of experimentation you undertake to create new or improved products and production lines. If your team is systematically testing new designs, materials, or manufacturing techniques to make a product better, faster, or more cost-effectively, you are likely performing qualifying R&D.

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Qualifying activities are present throughout the entire production lifecycle:

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Product & Tooling Development

  • This includes the design and engineering of new products and the equipment needed to build them.

  • Developing second-generation or improved products using computer-aided design (CAD) tools.

  • Creating and testing prototypes using three-dimensional solid modeling.

  • Designing and developing custom tooling, equipment fixtures, jigs, and molds.

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Process & Automation Improvement

  • This focuses on enhancing the efficiency, speed, and capability of your manufacturing lines.

  • Designing more efficient operational processes and optimizing the flow of materials.

  • Developing unique Computer Numerical Control (CNC) programs or innovative Programmable Logic Controllers (PLCs).

  • Streamlining production through new automation to increase capacity, improve yields, and reduce costs.

 

Quality, Safety & Compliance
This involves the technical work required to meet higher standards for performance and regulation.

  • Developing new processes to meet increasing safety or environmental requirements, such as new emissions laws.

  • Implementing new production standards and quality assurance processes to improve product reliability.

  • Performing alternative material testing to enhance product performance or durability.

 

From the initial design to the final quality check, the drive to innovate in manufacturing is filled with qualifying activities that can translate into significant tax savings.

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