Colorado R&D Tax Credit

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R&D tax credits for Colorado

The Research and Development (R&D) Tax Credit is available to Colorado businesses that invest in qualified research and development activities. The credit can be worth up to 25% of the amount financed in R&D, with a maximum credit of $250,000 per year.

Activities that qualify for the credit include:

  • Developing new or improved products, processes, or services
  • Developing software for internal use
  • Testing products or processes in a laboratory setting
  • Engineering and design work

Businesses must invest at least $2,500 in qualifying research and development activities to qualify for the credit. The credit is available to companies, including corporations, partnerships, and Sole Proprietors.

The R&D Tax Credit is a valuable tool for businesses investing in innovation and developing new products and services. Contact your tax advisor to learn more about how the credit can benefit your business.

What Is The Colorado R&D Tax Credit?

If you are a pre-certified or certified Colorado business, you may be able to take advantage of the Colorado Research and Development (R&D) Tax Credit. The R&D Tax Credit is an incentive designed to help businesses invest in research and development activities. The credit is available to both for-profit and not-for-profit companies, and it can be used to reduce the amount of tax you owe on your business income.

Starting January 1, 2012, taxpayers need to annually submit an R&D Tax Credit claim on their Colorado income tax return to be eligible for the credit. Even if your business did not operate in Colorado during the year, you might still be able to claim the credit if you carried out qualifying research and development activities in Colorado.

Can Universities Claim R&D Tax Credits?

The Research and Development (R&D) Tax Credit is a federal tax credit available to companies that incur research and development expenses. The R&D Tax Credit was permanently extended by the American Taxpayer Relief Act of 2012. Companies can claim the R&D Tax Credit for qualifying research activities, including software development, engineering, manufacturing process improvement, and product design.

Universities can claim the R&D Tax Credit for qualifying research activities. Universities are eligible to claim credit for research that develops new or improved products, processes, or software. Universities must demonstrate that the research is unique, original, and innovative to qualify for the credit.

When Can I Claim R&D Tax Credits?

The R&D Tax Credit can be claimed for qualifying research expenses incurred in the tax year. After December 31, 2015, research expenses must be incurred to be eligible for the credit. Costs incurred prior to 2016 may still qualify for the credit if they meet the credit requirements.

This incentive is 3% of the Colorado taxable income. There is a cap of $150,000 per year for each taxpayer. This credit is refundable, so if it is more than the tax liability, a check is issued for the difference.

What Qualifies as R&D?

To qualify for the R&D Tax Credit, research must be undertaken to discover new knowledge. Research must also be directed towards improving or developing a product, process, software, technique, formula, or invention. The credit is not available for routine activities or improvements commonly used in the business.
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