Getting medication from a lab to the first clinical trial can be expensive. Fortunately, businesses can claim R&D tax credits for clinical trials and offset up to 22% of research expenses, depending on the state the company operates in. R&D tax credits are federal government tax incentives that encourage innovation. Activities conducted during clinical trials are qualified research activities (QRAs), meaning companies can use them to claim R&D tax credits. Here is how your company can qualify.
First, you must prove to the IRS that your business is performing R&D activities. Typical qualifying clinical trial activities include:
- Developing new drugs and therapies
- Designing new or improved medical devices
- Creating new or improved drug delivery methods
- Creating new or improved testing methods
- Refining the manufacturing process
- Automating processes
All these activities meet the IRS’ four-part test requirements. They are technological, intended to improve a business component, eliminate uncertainty, and involve an experimental process.
Additional requirements companies must meet are that R&D activity must be performed in the United States and have the intellectual property rights to the research.
Finally, another crucial step when filing an R&D tax credit claim is to report the job titles of everyone involved in R&D. Some examples of job titles for those engaged in R&D include:
- Clinical Trial Coordinators
- Clinical Trial Associate
- Clinical Trial Pharmacologist
- Pharmacists
- Physicians
- Research Coordinators
- Research Nurses
If some research participants do not have the above job titles, you can still report their activities as part of your R&D tax credit claim. Document all R&D activity to maximize your chance of receiving the most tax credits possible.
Claiming R&D tax credits for clinical trials can be a burdensome process. MainStreet makes applying for R&D tax credits easier by finding you all eligible tax credits for your business. Contact us to get started!