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R&D Tax Credits for Agriculture

Today, agriculture and technology work hand-in-hand. In fact, if you’re in agriculture, you’re probably engaged in activities right now than could win you substantial federal and state tax benefits in the form of research and development (R&D) tax credits.

What are R&D tax credits? Their federal and state tax incentives designed to encourage innovation, technical design, and product development and enhancement. They were created by Congress to provide an economic stimulus so the U.S. can remain head of the pack on innovation. If you develop new products, processes, or inventions, R&D tax credits will financially reward you by returning to you a significant percentage of what you invested in qualified research activities and qualified research expenses. Learn more

An important benefit: you can claim the credit for the current tax year and for three prior tax years. As a result, you could receive four years’ benefit the first time you use the R&D credit.

Two vital points:

  • You don’t have to develop a product or process that’s new to its industry; it only needs to be new to your company. 
  • In addition, your research efforts don’t have to be successful. The IRS recognizes that the scientific method requires trial and error.

How To Qualify for the Credit

The IRS requires that your R&D activities meet this four-part test. — See if you qualify

Expenses That Qualify for the R&D tax Credit

  1. Employee wages:  W-2 wages for employees involved in R&D related activities
  2. Supplies: The cost of supplies consumed or used in the R&D process
  3. 1099 contractor expenses: The cost of contractors used in support of R&D-related activities

Qualifying Activities

What agricultural research activities qualify for the credit? 

1. Developing new or improved:

  • storage techniques
  • conveyance systems
  • products or processes to maximize yield
  • software
  • irrigation technologies
  • techniques or equipment to minimize environmental impact
  • methods of protecting crops from disease
  • irrigation systems
  • disease-resistant crops or livestock
  • ways to prevent or control disease or insect pests
  • gene transfer technologies (such as the DNA engineering of high-end bull semen)
  • automated processes
  • an innovative product or process
  • livestock feeds or feeding techniques 
  • new breeding techniques
  • new cultivation techniques

2. Testing:

  • new or improved planting or harvesting techniques
  • new or improved chemical additives or fertilizers
  • new feeds or feeding techniques to improve livestock health or growth
  • new soil blends, introducing new pH levels, mineral content, or nutrient density
  • new techniques or products to prevent disease or pest damage
3. In addition:
  • Hybridizing or developing of new strains of crops, plants, or livestock
  • Implementing precision farming techniques to increase yield and/or production efficiency
  • Experimenting with new or different fertilizers 
  • Evaluating and implementing new techniques to increase yields
  • Improving harvesting techniques
  • Implementing new equipment to improve harvest cycle times
  • Optimizing the treatment and management of farm wastes in an energy-efficient manner
  • Designing and implementing biosecurity practices via facility cleaning and disinfection

See If You Qualify

Less than one-third of companies eligible for the credit even know it exists, so two-thirds are losing out. Is yours one of them? You can plow your substantial tax savings back into your business, so that you can undertake even more research and win additional R&D tax credits! 

Last year, the IRS made its reporting and record-keeping requirements for R&D tax credits much, much stricter and complex. As a result, it’s to your benefit to only rely on a specialized company with both engineering and accounting capabilities that can undertake a full-fledged technical study. 

As a licensed engineering firm backed by accountants that focuses on federal, state, and local tax benefits, Engineered Tax Services is an expert at R&D tax credit studies. Over the past 20 years, we’ve saved clients many, many millions of dollars. Contact us today for your free R&D tax credit analysis.

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

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