The Texas Research and Development Tax Credit (R&D tax credit) is a state-level tax incentive that encourages businesses to conduct research and development activities in Texas. The credit is available to businesses of all sizes, and it can be used to offset the state franchise tax liability.
The Texas R&D tax credit is a dollar-for-dollar credit, meaning that for every dollar of qualified research expenses, the business can reduce its state franchise tax liability by one dollar. The credit is capped at $20 million per year per taxpayer. To be eligible for the Texas R&D tax credit, the research activities must be conducted in Texas and must meet certain requirements. The activities must be:
Original and creative
Intended to discover new knowledge
Targeted at a specific commercial application
The research activities can be conducted by the taxpayer or by a third party on behalf of the taxpayer. The expenses that qualify for the credit include wages, salaries, and fringe benefits for employees engaged in qualified research activities; supplies, materials, and equipment used in qualified research activities; and contract research expenses.
The Texas R&D tax credit is a valuable incentive for businesses that conduct research and development activities in Texas. The credit can help businesses to offset their state tax liability and to reduce the cost of research and development.
In addition to the Texas R&D tax credit, there are a number of other state and federal tax incentives available to businesses that conduct research and development activities. These incentives can help businesses to finance their research and development efforts and to compete in the global marketplace.
Businesses that are considering conducting research and development activities should consult with a tax advisor to determine which incentives are available to them.