R&D credit by industry
What counts as R&D in your industry
The IRS four-part test is the same everywhere. What passes it looks different in every industry. These guides show the qualifying work, the usual sticking points, and a worked example for each one.
SaaSMost SaaS product engineering qualifies for the R&D tax credit. The usual sticking point is separating real engineering work from third-party configuration and cosmetic UI changes.AIModel training, fine-tuning, and evaluation work usually qualifies for the R&D tax credit. The sticking point is separating genuine experimentation from prompt tweaks against a vendor's API.FintechCore fintech engineering, ledgers, fraud models, and payment infrastructure, usually qualifies for the R&D tax credit. The sticking point is separating that from compliance and legal work, which does not.DevtoolsDevtools engineering, compilers, language servers, and build systems, qualifies for the R&D tax credit at a higher rate than most software categories, since deep technical uncertainty is the normal day job.HardwareHardware prototyping, PCB iteration, and firmware development usually qualify for the R&D tax credit. The sticking point is drawing the line between development and production.BiotechPreclinical research, assay development, and process development usually qualify for the R&D tax credit. The sticking points are work done by foreign contract research organizations and research funded by an outside sponsor.HealthtechMost healthtech software engineering qualifies for the R&D credit. The usual sticking point is separating technical development from clinical, regulatory, and compliance work, which does not qualify on its own.EcommerceEcommerce engineering qualifies when it involves real technical builds, like custom inventory or search systems. Storefronts running mostly on off-the-shelf themes and apps rarely qualify.AgenciesAgency engineering can qualify, but the funded research exclusion usually blocks it: work a client owns and pays for regardless of outcome does not count. Work the agency funds itself, and keeps rights to, can.GamingEngine, tools, and gameplay systems programming at gaming studios usually qualifies for the R&D credit. Art, audio, and content production without genuine technical uncertainty usually does not.RoboticsMost robotics engineering, especially perception, control, and sim-to-real work, qualifies for the R&D credit. Materials consumed building and testing prototypes, including ones that got destroyed, count as expenses too.Climate techClimate tech engineering, especially battery management, grid forecasting, and control system software, usually qualifies for the R&D credit. The sticking point is separating that from equipment procurement and installation.
Not sure where you fit? Start with what software work qualifies as R&D, then check your state on the state credit index.