Fueling Innovation: The R&D Tax Credit for Software Developers

If you’re in the business of building software, there’s a good chance you’re also eligible for the federal R&D (Research & Development) tax credit, whether you’re writing code, solving technical challenges, or building custom solutions. Many software developers don’t realize that the work they do every day can qualify for this powerful tax incentive.

Why It Matters

The R&D tax credit allows companies to reduce their income tax liability, and in some cases, offset payroll taxes. For software businesses, especially startups and fast-growing teams, that means more cash to reinvest in talent, infrastructure, or product development.

What Counts as R&D in Software?

The IRS recognizes a wide range of software-related activities as R&D, as long as you’re tackling technical challenges and going through a process of experimentation. Common qualifying activities include:

• Developing new software products or platforms.
• Improving performance, scalability, or security of existing systems.
• Building custom integrations or APIs that require original coding and problem-solving.
• Refactoring code to enhance functionality or efficiency.
• Developing internal tools or applications for business operations.
• Creating or modifying algorithms to solve technical problems.

Real-World Example

A SaaS company built a new feature that integrated with multiple third-party platforms via APIs. The development process involved original coding, data mapping, debugging, and performance optimization. All of this qualified as R&D, and the company used the credit to help fund their next development sprint.

Don’t Miss Out

If your team is writing code, solving technical problems, or testing new features, you’re likely doing qualifying R&D. And since the credit is available to companies of all sizes, including startups, it’s worth exploring.

Curious whether your development efforts qualify? Let’s connect and find out how much your business could be saving.