Final Regulations on the Research Credit

Final regulations answer taxpayer questions about whether the tax credit for increasing research activities can be claimed for the development of software for internal use. The regulations say that software for general and administrative purposes does not qualify. However, R&D costs for internal-use software that meets a high threshold of innovation test can qualify for the research credit. Note: For 2016 and later, certain small businesses can use the credit to offset employer Social Security taxes rather than income taxes up to $250,000.