Farms and farmers often feel the squeeze when it comes to cost. Farmers are some of the hardest working Americans who often get left out when tax bills are changed or amended. Many farmers are receiving smaller farm bills, and funds are constrained. Is there any reprieve for farmers in research and development (R&D) tax credits?
The answer is unequivocally yes. Many farmers and farm owners who are experimenting with new methods and processes fail to claim the research and development tax credits for which they may be eligible. Whether they are uninformed about R&D tax credits or think they do not qualify, it’s important to understand that with diminishing profits from farms and agriculture, now more than even farmers and farm owners need to take advantage of R&D tax credits.
No matter how big or small your agricultural business may be, experimental development of farming methods, equipment and growing methods can qualify for tax credit support. The important thing is that you must be attempting to expand the technological base through experimentation. With claimed tax credits, farmers can expand their business, buy newer or more equipment, pay for more help, and really stretch their dollars.
The problem is when people read “research and development”, the first thing that comes to mind is big pharmaceutical companies and scientific divisions that work in labs researching day in and day out. We cannot stress enough that the definition of research and development is far broader than just people in lab coats. Research and development can stretch to many different areas of innovation, such as experimental development of new methods, processes or equipment. For example, a dairy farmer may try to develop an improved milking methodology or cooling process for their dairy products. Expenditures for labor, materials consumed and contract engineering could qualify for research and development tax credits. It is important to note, however, that “off-the-shelf” purchases and capital equipment are not qualified under the US federal Research Credit. These benefits are all about experimental development of new or improved products, processes and equipment.
Research and development tax credits are specifically put into place to reward businesses who spend dollars to expand the field of technology by experimental means inside of the US rather than outsourcing that development activity. Business owners are urged to claim these R&D tax credits to help grow their company and to keep technologically based jobs here in the US.
Let us help you and your farming operation take advantage of research and development tax credits. Don’t leave money lying on the table. Contact Tax Credit Advisors today.