Five Signs Your Business Qualifies for the R&D Tax Credit

Published September 5, 2026

Many businesses conduct qualifying R&D without calling it that. You do not need a lab, a patent, or a team of PhDs. Here are five signs that your business may be eligible for the federal R&D tax credit under IRC Section 41.

1. Your team builds things that did not exist before

If your engineers, developers, or scientists create new products, tools, systems, or processes — rather than exclusively reselling, installing, or maintaining existing ones — you are developing business components that may qualify.

This applies to physical products, software, manufacturing processes, chemical formulations, biological methods, and more. The key is that your team is doing the development work, not just purchasing or configuring someone else's product.

2. You have tried things that did not work

Failed experiments, abandoned prototypes, scrapped designs, and pivoted approaches are not wasted effort — they are evidence of the process of experimentation required by the four-part test.

If your development process involves trying approaches, evaluating results, and iterating — rather than following a known recipe — that experimentation may qualify.

3. Your developers or engineers spend significant time solving technical problems

Look at what your technical staff actually does day to day. If a meaningful portion of their time goes toward:

Figuring out how to make something work
Testing whether an approach meets performance, reliability, or quality requirements
Evaluating design alternatives
Debugging complex systems where the root cause is uncertain

Then that time may be generating qualified research expenses.

4. You have employees with technical backgrounds

The credit requires that research be technological in nature — grounded in engineering, computer science, biological science, or physical science. If you employ software engineers, mechanical engineers, electrical engineers, chemists, biologists, food scientists, or other technical professionals, their qualifying work generates QREs.

This does not mean only PhDs or credentialed researchers count. A machinist designing a new fixture, a developer building a data pipeline, or a food scientist formulating a new product — all may qualify.

5. You pay contractors for technical development work

If you hire outside firms to develop components, write software, perform laboratory testing, or do engineering work on your behalf — and you retain the rights to the results — those contractor payments may be included as QREs at a reduced rate.

What to do next

If any of these apply to your business, it is worth evaluating the credit in detail. Use our free calculator to get a preliminary estimate in about three minutes. No account is required.