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Software and the Research & Development Tax Credit


Software companies have had tremendous success in claiming the R&D Tax Credit, due to continuous advancements in the development of software products and services.  Software continuously evolves as priorities change regarding how software should function.  This necessitates technological improvements and new development through ongoing research and development.  Traditionally, the IRS only allowed software held for sale, lease, or license to qualify for the R&D Tax Credit. 


However, new regulations regarding software developed for internal use have created opportunities for more software companies to qualify.

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Examples of Qualified R&D Activities


    • Developing new or improved software applications or SaaS platforms
    • Development of new or improving upon existing features, functionalities or capabilities for software applications and SaaS platforms
    • Redesign of software applications and SaaS platforms to work with differing device types and operating environments
    • Functionality improvements can inlcude various feature enhancements such as, data acquisition, manipulation, and processing, report generation, and computation
    • Performance improvements can relate to the speed of computation, transactions per second, or number of simultaneous users
    • Reliability improvements can involve stability enhancements and improvements to data recovery in the case of crash or error, or to maintain overall data integrity in a high transaction operating environment