Posted in Gusto on April 25, 2018

Small Businesses May Be Eligible for up to $250,000 in Tax Credits

In less than a year, Gusto, one of the top payroll, benefits, and HR technology platforms for small businesses, has helped nearly 1,000 U.S. small businesses claim more than $32.5 million with the Qualified Small Business Payroll Tax Credit for Increasing Research Activities, or “federal R&D tax credit.” Tax credits are generally favorable for small businesses as they could reduce a business’s tax liability—allowing for more money to be put back into the business.

Qualified small businesses can claim the federal R&D tax credit in real time as they run their payroll on Gusto. If eligible, the platform can automatically claim eligible credits against their employer Social Security taxes.

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Fast Facts

  • The top five industries—software publishers, computer systems design and related services, scientific research and development services, business support services, and financial investment activities—represent nearly $16 million, or almost half of all federal R&D tax credits claimed on Gusto in the last 10 months.
  • The average federal R&D tax credit claim across all industries on Gusto is $31,890.
  • Tech ranks No. 1. Software publishers are the top claimants of the federal R&D tax credit on Gusto with a combined total of $7,775,133 claimed. Their average claim is about $42,000.
  • Print media is evolving! Newspaper, periodical, book, and directory publishers have claimed a combined $271,690 in federal R&D tax credits on Gusto.
  • Research and travel go hand-in-hand. Travel arrangement and reservation services companies have claimed nearly $246,000 in federal R&D tax credits on Gusto.
  • Innovation is happening in the food industry. Restaurants, eating places, and specialty food stores have claimed nearly $145,000 combined in federal R&D tax credits on Gusto.
  • Futuristic furniture may hit the market soon. Home furnishing and furniture stores and wholesalers have claimed almost $38,000 combined in federal R&D tax credits on Gusto.

About the Federal R&D Tax Credit

The Qualified Small Business Payroll Tax Credit for Increasing Research Activities helps eligible small businesses offset their costs for research and development. Beginning in 2017, small businesses could use the tax credit—up to $250,000 per fiscal year—toward their payroll tax liability, instead of their income tax liability.

Small businesses generally need to have less than $5 million of gross receipts, have gross receipts for five years or less, and have qualified research and development costs to be eligible for the federal R&D tax credit. Small businesses in any industry may want to consider consulting their tax advisor if they are actively developing new products, processes, or formulas to understand if they may be eligible for the tax credit.

Methodology

Gusto analyzed small businesses who claimed the federal Qualified Small Business Payroll Tax Credit for Increasing Research Activities through its platform from June 15, 2017 to April 16, 2018, among its more than 60,000 customers. Companies were classified using a North American Industry Classification System (NAICS) code when available. All data was aggregated and anonymized.