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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 Eligible R&D Activities


  • Designing and developing new or improved technologies, algorithms, or databases
  • Programming code
  • Designing and developing software architecture
  • Developing technical specifications
  • Integration/convergence of technology platforms with different communication protocols, programming languages, or architectures
  • Application development