The Lehigh Valley Economic Development Corp. reported recently that the region is a leader in patent development.
The Lehigh Valley ranks in the top 65 metropolitan markets in the nation for patent development and ranks even higher when compared to markets its own size, coming in at 21st in United States metropolitan regions with a population of 200,000 to 1 million people, the organization's research found.
While such innovation surely brings many benefits to local companies, we wonder if those companies are taking advantage of the tax benefits that come with inventing new products.
A major tax benefit available to innovators is called the Research and Experimentation Tax Credit, sometimes also known as the Research and Development or R&D Tax Credit. The credit was recently made permanent by Congress, allowing for increased tax planning opportunities.
Inventing a new product – or even researching a new product – can qualify companies for a tax credit for qualified expenses, including wages for qualified services, supplies used in R&E activities and up to 65% of contract services.
Here in Pennsylvania, the state also offers Research and Development Tax Credits in addition to the federal benefit.
The qualification rules are fairly complex, but we’ve helped many Lehigh Valley companies determine if they’re eligible. Also, a study must be conducted for R&E Tax Credits, so there should be a tax/benefit analysis to determine if the tax savings will exceed the cost of the study.
