In today’s rapidly evolving digital world, businesses are continually automating processes and enhancing their technological capabilities. From web development to comprehensive system architecture, companies are heavily invested in software development to remain competitive. Collaborate with Omega’s R&D specialists to leverage everyday innovations, boost your business success, and optimize your R&D tax credits.
Common Qualifying Software Activities
Developing Innovative Algorithms and Software Solutions
Businesses are continually pushing the boundaries of technology by creating new algorithms, APIs, and logic. These innovations are critical for improving data processing speeds and accuracy, enabling companies to handle larger datasets and provide better user experiences.
Creating New or Improved System Architectures
Application development is at the heart of software innovation. Companies are developing proprietary software solutions to meet unique business needs, ensuring they stay ahead in a competitive market.
Implementing cutting-edge AI or machine learning models
Integrating advanced AI models to enhance user experience and automate complex tasks.
Exploring New Programming Languages and Frameworks
Staying at the forefront of technology advancements requires experimenting with emerging programming languages and frameworks. This exploration is vital for businesses looking to maintain a competitive edge.
Creating Custom Software Integrations
Developing custom APIs to integrate various software systems enhances overall functionality and user experience. These integrations streamline operations and provide seamless user interactions across platforms.
Qualified Expense Examples
Payroll and Staff for Software Development
- Software Engineers and Data Scientists
- AI Developers and Machine Learning Engineers
- UX/UI Designers and Front-End Developers
- DevOps Engineers, Quality Assurance Specialists
- Project Managers, Support Staff, and System Analysts
Engaging Contract Personnel
- Software Consultants
- Contracted Computer Engineers
- Third-Party Developers
Software Hosting Costs
Leveraging powerful cloud platforms is essential for modern software development. Some of the top choices include:
- Amazon Web Services (AWS)
- Microsoft Azure
- IBM Cloud
- GitHub
- Google Cloud Platform
Section 174 Impact
Remember that Section 174, amended by the Tax Cuts and Jobs Act of 2017, currently requires the amortization of research & experimental (“R&E”) expenditures over a 5 year (domestic expenses) or 15 year (foreign expenses) period. This differs from prior rules, which allowed the immediate deduction of expenses in the year the expenses were incurred. Although this is simply a timing difference, the overall effect is an increase in tax liability in the earlier years of the amortization resulting in a reduction of cash flow.
The rule change is quite unfavorable, and there is currently legislation supported by both parties in Congress to make a change to revert back to the old rules. At this time, there is no timing or guarantee that a change will happen. As a result, software companies must carefully evaluate their Section 174 expenses in addition to their Section 41 R&D expenses and should look into claiming the R&D credit to help mitigate the negative impact of the 174 amortization.
Potential Benefits of Partnering with Omega’s R&D Experts
Our dedicated R&D team helps businesses save between 8% to 12% on eligible R&D expenditures. With extensive experience in the software industry, we have successfully claimed the R&D tax credit for businesses specializing in games, apps, media, cybersecurity, and more.
Matt Davenport
Director of Research & Development (R&D)
R&D Tax Credit expert, with a deep understanding of tax regulations, Davenport has more than 10 years’ experience helping businesses maximize and substantiate various complex tax credit incentives. Davenport holds a Bachelor of Business Administration (BBA) in Business Management & Entrepreneurship from Texas Tech University and has extensive tax credit consultancy experience, successfully leading hundreds of R&D Tax Credit engagements, R&D Tax Credit audits, and tax credit planning services.