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R&D Tax Credits: A Guide for the Aerospace Industry

If you’re part of the aerospace industry, research and development (R&D) tax credits are powerful tax-saving solutions that should definitely be on your radar. In fact, they’re ideal for this highly technological vertical.

R&D Tax Credits: Flying on Credit Here

If you’re part of the aerospace industry, research and development (R&D) tax credits are powerful tax-saving solutions that should definitely be on your radar. In fact, they’re ideal for this highly technological vertical.

Created in 1981 to keep the U.S. at the forefront of innovation, R&D tax credits are offered by both the federal government and 35 U.S. states. They reward companies that develop new products, processes, or inventions—by reimbursing them for qualified activities.

R&D tax credits are ideal for the aerospace industry because aeronautical R&D projects are highly technical and complicated. They’re often long-term initiatives that demand that complex, interconnected systems collaborate seamlessly. To ensure that new aerospace systems function property, major iterative research and testing is necessary to adhere to project-specific criteria, rules, and laws.

Owing to this fact, if your research activities qualify, you can earn a substantial tax credit that you could use to:

  • Immediately reduce your income and/or payroll tax liability
  • Bank valuable tax credits to apply against future income tax owed
  • Increase your business valuation
  • Liberate capital for your business development, a concrete advantage in today’s uncertain economic times

Examples of Qualifying Activities for the Aerospace Industry

Consider applying for the credit if you create or develop:

  • New or improved manufacturing processes to increase output, improve performance, or reduce waste
  • Tooling, dies, and fixtures to create new or improved production processes
  • Methods to reduce production costs and product weight
  • New or improved aircraft, aerospace, and weaponry components for customers
  • New aircraft components with exacting specifications or narrow tolerances
  • Sequencing and re-sequencing manufacturing operations
  • Prototypes and first articles to validate design and performance, including conducting quality control to test new iterations
  • New machines, fixtures, jigs, and tools to manufacture and assemble aircraft 
  • New composite materials
  • Secondary operations, such as surface treatment of metals
  • New or improved metal forming, welding, and machining techniques
  • Efforts to improve communication, navigation, lighting, and in-flight entertainment systems in commercial planes
  • Designs or kits to integrate new monuments, galleys, seats, or in-flight entertainment systems with an aircraft
  • New heat-treatment profiles and procedures
  • New automated processes 
  • Software programs to automate production equipment
  • New or improved aircraft simulators and cockpit software
  • Modifications to comply with regulations, such as testing new equipment 
  • Metallurgical, tensile, and gate freeze studies for evaluating products and components 
  • Improved aircraft designs to reduce drag (for example, engineering narrower wings, smoothing the surface, or developing improved materials)
  • New unmanned aerial vehicles (UAVs)

Qualifying Job Titles

Examine if you have these job titles on your payroll or if you hire third-party contractors with these responsibilities:

  • Aerospace engineers
  • Chemical engineers
  • Computer-aided design (CAD) engineers
  • Materials engineers
  • Mechanical engineers
  • Software engineers
  • Aerospace technicians
  • Aircraft designers
  • QA/QC personnel

Getting an R&D Tax Credit Analysis to see if you qualify is the first step!

eBook: The Architect's Guide to R&D Tax Credits

This comprehensive e-book is designed to help you recognize which of your activities qualify for R&D tax credits! 

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