Tax basics
The R&D tax credit, explained for founders
The federal government pays startups to build software. Most founders never claim it. Here's how it works.
by Claimship ·
Section 41 of the tax code gives companies a credit for research and development. It has existed since 1981. Congress made it permanent in 2015.
The credit is not a deduction. A deduction lowers your taxable income. A credit is cash off your tax bill, dollar for dollar.
What it's worth
The credit works out to roughly 6 to 10% of your qualified research expenses. For a software startup, those expenses are mostly engineering payroll.
Say you have four engineers at $150,000 each, spending 70% of their time building product. That's $420,000 in qualified expenses. The credit lands between $25,000 and $42,000. Every year. Estimate your credit in the calculator.
You don't need to be profitable
Startups with under $5M in revenue can apply the credit against payroll taxes instead of income taxes. Your quarterly payroll tax bill drops. That's real cash at any stage.
The cap is $500,000 per year.
Why most founders skip it
The IRS requires documentation. You need to show what work qualified, who did it, and what it cost. Firms call this a study.
Studies are expensive. Most firms charge 15 to 25% of the credit they find. The process takes weeks of interviews and time surveys.
That's the problem Claimship solves. We build the study from your GitHub, Linear, and Slack. Flat fee. Your CPA files it.
