Apparel R&D Credit

The R&D Tax Credit is a powerful incentive designed specifically for the work apparel and textile firms do every day. It rewards the technical problem-solving inherent in developing new fabrics and functional garments, turning your firm's innovation into a significant tax refund.

Eligibility doesn’t require creating a new fashion category. Instead, the credit rewards your process of systematic trial-and-error to arrive at a final product. If your team experimented with different fiber blends, construction methods, or dyeing processes to resolve technical uncertainty and meet a product's unique goals, you were likely performing qualifying R&D.

Qualifying activities are present throughout the entire product development process:

 

Fabric & Materials Development
This foundational stage involves creating and testing the core materials for the products.

• Developing and testing new textile blends or treatments for a specific function (e.g., UV protection, moisture-wicking, or stretch).

• Experimenting with new, sustainable materials (e.g., bio-based fibers) and testing their durability, comfort, and manufacturability.

• Prototyping new yarns, weaves, or non-woven fabrics to achieve specific performance, weight, or cost targets.

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Functional Garment Design
This phase focuses on engineering the product itself to solve complex technical challenges.

• Prototyping and engineering new functional garment designs, such as novel compression patterns for athletic wear or ergonomic constructions for safety gear.

• Developing new construction techniques (e.g., ultrasonic bonding or seamless knitting) to replace traditional stitching and improve durability.

• Integrating new technologies, like smart fabrics or wearable electronics, into garment designs and testing their functionality.

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Manufacturing Process Development
The technical work required to meet modern production, efficiency, and sustainability standards.

• Developing and testing new, eco-friendly production processes, such as waterless dyeing or ozone finishing, to reduce chemical use and environmental impact.

• Designing new pattern-making algorithms or automated cutting processes to dramatically reduce fabric waste.

• Engineering and testing new factory equipment or tooling to automate a previously manual construction or quality control process.

From fiber to factory, the apparel design and manufacturing process is filled with qualifying activities that can translate into valuable tax savings.