A study found that every $1 in R&D tax credit leads to about $4 in long-term research investment. That’s a powerful return, but most businesses overlook qualifying work already underway in their development and testing phases.
This article walks through 10 real-world R&D tax credit examples and breaks down what qualifies across different industries so you can identify eligible work in your own business.
What Is R&D? What Qualifies As R&D?
R&D involves creating new products, improving existing ones, or solving technical problems. To claim the maximum credits, you need to document technical challenges, iterations, failed attempts, testing phases, time tracked, and team involvement.
Direct R&D Activities Examples
- Experimental research
- Prototype development
- Innovation in design
- Data analysis
- Technology development
- Scientific research
Indirect R&D Activities Examples
Eligible wage expenses include direct research work, direct supervision, and direct support roles. Supporting activities may include:
- Ancillary operations
- Training
- University research
- Feasibility studies
- Engineering
- Design
- Operations research
- Mathematical analysis
- Computer programming
- Data collection
- Testing
- Psychological research
Real R&D Tax Credit Examples
1. GBatteries
GBatteries, a battery technology company, secured funding through the SR&ED program. The result: 60+ patents and breakthroughs in lithium metal batteries. Their R&D work focused on solving technical uncertainty around battery charging speeds and longevity, making them a textbook example of how tax credits fuel innovation.
2. cStar Technologies Inc.
cStar Technologies, an Ontario-based wireless communication systems developer, leveraged R&D tax credits to run complex experiments and secure patents. Their work on advanced wireless systems involved significant technological uncertainty and experimentation.
3. AmacaThera
AmacaThera, a Toronto biotech startup designing post-operative pain relief technology, used SR&ED funding during COVID to maintain clinical trials. The tax credits helped sustain their research when other funding sources were disrupted.
4. Wilder Harrier
Wilder Harrier, a Montreal pet food company, explored insect protein and upcycled produce through SR&ED-supported R&D. Their work involved significant experimentation with alternative protein sources and novel manufacturing processes.
5. Hydrogen in Motion Inc.
Hydrogen in Motion, a Vancouver hydrogen storage technology developer, received advisory support through the SR&ED program during the pandemic. Their R&D focuses on solving technical challenges in hydrogen storage materials.
6. Turkana
Founded in 2013, Turkana used SR&ED incentives to hire developers and expand software innovation across defense, medicine, and energy sectors. The imaging technology company leveraged credits to scale their technical team and pursue complex R&D projects.
7. Motion Metrics International Corp.
Motion Metrics, a Vancouver-based company, applies machine learning and computer vision to mining safety and productivity. Their qualifying R&D work involves developing novel algorithms and solving technical challenges in real-time image processing.
8. Pattison Sign Group
Pattison Sign Group, a Toronto signage manufacturer, improved documentation processes and implemented ERP systems with SR&ED support. Their R&D involved solving technical challenges in manufacturing processes and digital integration.
9. Autovance Technologies
Autovance Technologies, an Alberta software company providing web-based pricing tools for the auto industry, utilized the First-Time Claimant Advisory Service. This helped them understand what qualified and how to properly document their software development R&D.
10. Rio Tinto Fer et Titane (RTFT)
RTFT, a 70-year-old company pursuing titanium concentrate decoupling, used pre-claim consultation through the SR&ED program. Their decades of materials science R&D demonstrate how even established companies benefit from tax credit programs.
R&D Tax Credit Examples by Industry
1. Technology and Software Development
Software development accounted for 21% of R&D claims in 2022.
Eligible Expenses:
- Developer, designer, QA tester, product manager, and technical lead salaries
- Cloud services for development and testing
- New software platforms and applications
- Proprietary algorithms and custom codebases
- Novel API integrations
Mistakes to Avoid:
- Claiming basic bug fixes or UI updates
- Failing to track iterations
- Including post-development maintenance
2. Manufacturing
Eligible Expenses:
- Wages for engineers on new tooling and machinery
- Prototype material costs
- Automation systems for improved throughput
- Custom fixture and equipment design
- Six Sigma and lean manufacturing implementation
Mistakes to Avoid:
- Claiming commercial production following known methods
- Including standard quality checks
- Assuming aesthetic changes qualify
3. Architecture
Only 28% of architecture firms have claimed R&D credits.
Eligible Expenses:
- Architect and drafter wages for structural innovation
- BIM/CAD energy performance simulation
- Custom facade systems
- Innovative construction material research
- Adaptive reuse strategies
Mistakes to Avoid:
- Assuming LEED certification automatically qualifies
- Overlooking subcontractor contributions
- Failing to separate eligible work from non-qualifying phases
4. Engineering
Global engineering R&D investment is set to grow 10% annually through 2026.
Eligible Expenses:
- Wages optimizing building and mechanical systems
- HVAC and material testing
- Custom parts prototyping using FEA/CFD
- Code compliance research
- Emerging technology implementation
Mistakes to Avoid:
- Including routine CAD drafting
- Failing to document parametric changes
- Not logging simulation outputs
5. Food and Agriculture
Eligible Expenses:
- Agronomist, food scientist, and lab technician wages
- Crop yield and resistance trials
- Organic pesticide research
- Alternative protein formulation
- Sustainable packaging solutions
Mistakes to Avoid:
- Claiming marketing-focused reformulations
- Including packaging design without performance testing
- Not tracking failed formulations
How to Identify R&D Opportunities in Your Business
Ask yourself these questions:
- Does your team solve technical challenges with uncertain outcomes?
- Do you experiment with new solutions, materials, or processes?
- Do you document progress, iterations, and results?
If you answered yes to any of these, you likely have qualifying R&D work that could earn you significant tax credits.
Final Thoughts
Many companies leave money on the table because they don’t realize their everyday work qualifies for R&D tax credits. Whether you’re writing code, testing prototypes, or solving technical problems, the key is proper documentation of your experimentation process.
Try Chrono Platform to automate your R&D tracking and maximize your tax credit claims.
FAQ
What is an example of an R&D tax credit?
A software company developing new features that involve technical uncertainty can claim credits for developer wages, testing costs, and cloud infrastructure used during development.
What expenses can qualify for R&D credit?
Wages for employees directly involved in qualified R&D work, supplies consumed during research, and contract research expenses tied to activities with technical uncertainty.
What documentation do I need?
Project descriptions, time-tracking records, payroll data, test results, design iterations, emails, supply invoices, and contracts linking expenses to qualified research activities.
What is the maximum R&D credit?
There is no federal limit on the R&D tax credit amount. However, qualified small businesses face a $500,000 annual cap on the payroll tax credit election.
Is the R&D tax credit worth it?
Yes. The R&D tax credit offers a dollar-for-dollar reduction in tax liability, making it one of the most valuable incentives available to businesses investing in innovation.
How much is the R&D credit?
The credit typically amounts to around 10% of qualified research expenses, calculated using either the Regular Credit or Alternative Simplified Credit method.