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R&D Tax Credit Available to Offset AMT for Eligible Small Businesses


The Research and Development tax credit applies to the research and creation of new technologies, products and processes or the improvement of those already in existence. Congress added a new exciting provision for small businesses through the PATH Act of 2015. If you would like a better understanding of the R&D Credit before learning about the new provision, you can read more about it in a previous post here.

The R&D credit, which will oftentimes get “frozen” if the taxpayers are subject to Alternative Minimum Tax (AMT), may now be eligible to offset all or a portion of their AMT Liability if they are an eligible small business starting in tax year 2016. The definition of a small business currently stands as a business with average gross receipts for the previous three years of less than $50 million. Before the PATH Act, a taxpayer could not receive the R&D credit against AMT.

Knowledge of the rules now provides ample opportunity to make decisions for tax year 2016 and going forward. Eligible businesses can utilize these provisions to save tax money on R&D expenditures through this new tax provision.


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