SaaS Tax Credit Secrets Your Accountant Missed
Research and Development (R&D) Tax Credits
One of the most significant tax credits available to SaaS companies is the R&D tax credit. This credit is intended to encourage businesses to invest in research and development activities, which are crucial for innovation. SaaS companies often engage in activities that qualify for this credit, such as developing new software, improving existing products, or conducting feasibility studies. According to the IRS, qualifying activities must meet the four-part test: they must involve a process of experimentation, be technological in nature, have an intended purpose of creating new or improved functionality, and eliminate uncertainty1.