Does Your Client Qualify for the R&D Tax Credit? A Guide for Accountants

An estimated $60 billion of the $92 billion in available R&D tax credits went unclaimed in 2019. That's not because companies aren't doing qualifying work. It's because most of them don't realize they are.

As their accountant, you're in the best position to change that. Every client conversation about quarterly filings or year-end planning is a chance to surface credits they've been leaving on the table. Some firms have turned this into a six-figure advisory line by simply asking the right questions about what their clients are building.

This guide walks through the qualification framework, the kinds of activities and industries that tend to qualify, and what to look for across your client base.

The four-part test: how the IRS defines qualified research

The IRS uses a four-part test to determine whether an activity counts as qualified research. Your client's work has to clear all four parts:

1. Permitted purpose. The activity must aim at creating or improving a business component: a product, process, software, formula, technique, or invention. The improvement doesn't have to be new to the world, just new to the company.
2. Technological uncertainty. At the start of the project, there has to be genuine uncertainty about whether the technical result is achievable, what the right design is, or how to get there. If the team had to figure something out rather than follow a known playbook, that counts.
3. Technological in nature. The work has to rely on a hard science: computer science, engineering, chemistry, biology, physics, and related disciplines. Your client doesn't need to call itself a “tech company.” The underlying work is what matters.
4. Process of experimentation. The team has to be evaluating alternatives in some structured way: modeling, simulation, prototyping, systematic trial and error, testing. Most engineering and product teams do this as a matter of course.

For a deeper walkthrough of the test and how qualified expenses are calculated, see our complete R&D tax credit guide.

What kinds of expenses qualify?

Once an activity clears the four-part test, the costs tied to it become eligible. The main categories, per IRS guidelines:

• Wages for employees who perform, supervise, or directly support qualified research
• Contract research payments to U.S.-based third parties performing R&D on the company's behalf (65% of payments are claimable)
• Supplies and materials consumed during development and testing
• Cloud and computing costs tied to development, staging, and testing environments for software under development

The key word is “qualified.” The expenses only count if they're connected to work that passes the four-part test.

Industries and activities worth a closer look

The biggest misconception about the R&D credit is that it's only for software companies and biotech firms. In practice, the credit reaches into virtually every industry where companies are building, improving, or experimenting. Below is a sampling of industries and the kinds of qualifying activities that come up. This isn't exhaustive, and it's not a substitute for a formal qualification analysis, but it gives you a framework for conversations with clients.

Software and technology

This is the most well-known category, and for good reason. Developing, customizing, and improving software and hardware are core qualifying activities. That includes building new features, optimizing algorithms, developing internal tools, designing system architecture, and creating integrations. Supporting activities like contract development, product research to understand technical requirements, and technical management also qualify. Code that gets developed and then discarded still counts.

Manufacturing and industrial engineering

Manufacturers qualify more often than most accountants realize. Consider activities like designing components in a CAD system, developing new quality assurance processes, improving production line efficiency, experimenting with new materials or fabrication techniques, building custom tooling or automation, or 3D printing and prototyping. If the outcome of any improvement effort was uncertain at the outset, it's worth evaluating.

Construction and architecture

Look into work around developing new construction methods, experimenting with building materials, designing energy-efficient structures or pursuing LEED certification, evaluating design alternatives for novel site conditions, and improving structural engineering approaches. A general contractor that develops a new roofing method or a proprietary framing technique could have qualifying activities.

Healthcare and life sciences

Healthcare companies tend to generate above-average credits. Qualifying activities include developing medical devices, prosthetics, or diagnostic tools; designing software for patient management or emergency response routing; researching new treatment protocols or drug formulations; and building laboratory automation systems. Don't overlook supporting activities like quality testing, data collection, maintaining lab equipment, and regulatory compliance work.

Financial services and fintech

Any research into new trading algorithms, payment processing systems, fraud detection methods, customer identity verification, or risk modeling may qualify. A wealth management firm building a proprietary portfolio rebalancing engine, or a community bank developing its own multi-factor authentication system, are both solid candidates. Fintech companies building new lending platforms, underwriting models, or real-time transaction monitoring systems are almost certainly doing qualifying work.

Food and beverage

Companies developing new products, improving formulations, extending shelf life, optimizing packaging, or designing new manufacturing processes all have potentially qualifying activities. A craft brewery experimenting with fermentation techniques, or a CPG brand reformulating a product line to remove allergens, could each generate meaningful credits.

Agriculture and sustainability

Research into crop optimization, soil analysis techniques, sustainable farming methods, irrigation system design, or precision agriculture technology can qualify. Companies developing new fertilizer formulations, designing automated harvesting equipment, or building software to monitor crop health through satellite imagery are worth a conversation.

Professional services and consulting

This one comes with a caveat. If your client's consulting firm performs R&D activities on behalf of a customer, the customer, not the firm, generally claims the credit. The deciding factor is who owns the intellectual property.

But if the firm builds things for its own use, like proprietary tools, custom analytics platforms, internal automation, or a unique methodology backed by experimentation, those activities may qualify. A design firm that develops its own quality standards and testing protocols for hardware products is a real example of this.

Aerospace and defense

Activities around computer-aided design, finite element analysis, simulation, prototyping, and testing of components are strong candidates. So is any work optimizing manufacturing processes for aerospace parts, or testing components against regulatory and safety standards.

Transportation and logistics

Companies developing new vehicle designs, safety systems, navigation technology, route optimization algorithms, or fleet management software may qualify. Research into improving electric vehicle battery performance or designing more efficient charging infrastructure are strong candidates as well.

Energy and utilities

Research into energy efficiency, renewable energy systems, smart grid software, transmission infrastructure improvements, and customer-facing tools for energy management can qualify. Utilities and energy companies investing in new interfaces, monitoring systems, or sustainability technology should be evaluated.

What doesn't qualify

A few categories of work that consistently fall outside the credit, regardless of industry:

• Research performed outside the United States
• Work funded by a grant, contract, or other entity (if the funder retains IP rights)
• Market research, surveys, focus groups, and customer interviews
• Routine maintenance, troubleshooting, and quality control (unless it's part of a broader R&D effort)
• Customization work done to fulfill a specific customer order
• Employee training and onboarding
• Patent filing and legal expenses
• Reverse engineering

For a full breakdown of qualifying vs. non-qualifying expenses, see our R&D tax credit overview.

The payroll tax offset: don't overlook startup clients

If you work with early-stage companies, the payroll tax offset is one of the most valuable provisions in the code. Qualified small businesses (under $5 million in gross receipts, no more than five years of gross receipts history) can apply up to $500,000 per year in R&D credits against their employer portion of FICA taxes, even with zero income tax liability.

That's up to $2.5 million in payroll tax savings over the eligibility window. For a pre-revenue startup doing meaningful engineering work, this is cash back into their runway, not a deferred asset on a balance sheet. The credit is claimed via Form 8974, which attaches to the quarterly Form 941 payroll filing.

Section 174: what changed and why it matters now

The Tax Cuts and Jobs Act of 2017 required companies to capitalize and amortize R&D expenses over five years (fifteen for foreign research) starting in 2022, instead of deducting them in full. The One Big Beautiful Bill Act, passed in July 2025, reversed this for US-based R&D. Full expensing is back starting in 2025, and small businesses under $31 million in average gross receipts can retroactively expense 2022 through 2024 costs on amended returns filed by July 6, 2026.

If you have clients who capitalized during those years, it's worth revisiting the math. The combination of restored expensing and the R&D credit may meaningfully change their tax position.

How to start the conversation with clients

You don't need to be an R&D credit specialist to identify candidates. Start with a few simple questions:

• Is your team building or improving products, software, or processes?
• Are you solving problems where the outcome wasn't known at the start?
• Do you employ engineers, developers, scientists, or designers?
• Have you invested in prototyping, testing, or experimentation?

If the answer to any of those is yes, it's worth a deeper look. The credit applies more broadly than most business owners expect, and flagging it is one of the highest-value things you can do as their advisor.

How Staxiom works with accounting firms

Staxiom is built to make the R&D credit easy to offer to your clients without adding complexity to your practice. Our platform connects to payroll, accounting, and engineering systems, identifies qualifying activities and expenses, generates the technical documentation, and produces a filing-ready study reviewed by R&D tax professionals.

If you want to explore what the credit could be worth for a specific client, get a credit quote. It takes a few minutes and there's no commitment.

This article is for general information and is not tax, legal, or accounting advice. Rules change and vary by location and industry. Consult a qualified tax professional about specific client situations.