Aerospace and defense companies produce complex, high-tech products such as spaceships, aircraft, and defense equipment. The aerospace and defense industry necessitates constant improvements in product quality and safety, making aerospace & defense contractors prime candidates for R&D tax credits.
R&D tax credits are dollar-for-dollar incentives for companies investing in research and development designed to encourage companies to innovate. We discuss six job activities the aerospace and defense industry can use as qualifying research activities (QRA) to claim R&D tax credits.
QRAs must use a technical process to eliminate uncertainty to improve a product. Some of the everyday activities aerospace and defense contractors perform to fit the criteria include:
Computer-aided engineering
Computer-aided engineering (CAE) encompasses the entire engineering process, including computer-aided design, modeling, and finite element analysis. It is used to optimize products, assemblies, and components validated to survive their current condition and optimized for characteristics such as weight and strength.
CAE helps companies improve their products by simulating the product’s response in several test environments. This can help engineers save time while reducing development time and costs and creating better products.
Designing new concepts
Designing new concepts involves creating designs that improve aerospace and defense components’ quality, reliability, and safety. Design techniques are used to improve every product component, including aircraft doors, landing gear, engine mounts, and more.
By constantly redesigning products, companies can remain competitive in the industry while being able to incorporate customer feedback into their products.
Improving Automation Processes
Automation hardware helps many aerospace and defense contractors improve productivity. However, all automation hardware eventually becomes obsolete, requiring contractors to improve it constantly. Improving the automation process is crucial to keeping processes running efficiently. Contractors can use automation technology to perform repetitive tasks, so engineers can spend more time overseeing processes and design.
Improving the Manufacturing Process
Improving the manufacturing process is essential for aerospace and defense contractors to continue making cutting-edge products. Comparing production line capability and ensuring product conformity are key aspects of keeping track of manufacturing.
Making products more environmentally friendly
While making products more environmentally friendly may not seem a part of R&D at first glance, it meets the criteria for a QRA. Designing products to reduce their environmental impact can help make products more fuel-efficient and reduce production costs.
Using new materials or components
Experimenting with new materials or components to improve products is another activity that can be used to claim R&D tax credits. Alternatives to traditional aluminum, including composites, can improve a product’s durability and strength-to-weight ratio.
In addition to QRAs, it is also necessary to report the job titles of every employee that participated in R&D activities. Job titles commonly associated with R&D in the aerospace and defense industry include:
- Aerospace Engineer
- CAD Designer
- Electrical Engineer
- Engineering Manager
- Engineering Director
- Mechanical Engineer
- Project Manager
- Software Engineer
If an employee has a different job title from the above but participated in R&D, they can still be included as part of your R&D tax credit claim.
There are even more activities aerospace and defense contractors can use to qualify for R&D tax credits. At MainStreet, we help your business determine what activities qualify as QRA and claim all the credits it is eligible for. Contact us for more information.
