Many startups qualify for the federal R&D credit and never claim it. For companies with under $5 million in revenue, it can offset up to $500,000 a year in payroll taxes.

What counts as research

Building new software, improving a product or developing a new process can qualify, as long as the work involves technical uncertainty and experimentation.

What you can claim

Wages for people doing qualified work, supplies used in experiments and a portion of contractor costs. Rent and general overhead do not count.

Keep records as you go

Simple notes on projects, who worked on them and what problems you were solving make the claim much easier to support if the IRS asks.