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Chad Oberg
Chad Oberg, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 174
Experience:  10 + years of accounting and tax experience, financial statements and business planning
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Research and development tax credit IRC section 41. I have

Customer Question

Research and development tax credit: IRC section 41. I have an LLC with about $113K of net income. They have 80K of research costs that will eventually be part of a self-created patented product. My understanding is I can 1) expense them under Section 174 as research and development costs or 2) amortize them. Why would I want to do a tax credit -- or is this over and above the expenses I have amortized or directly expensed. Obviously I am confused and unfamiliar with the mechanics of the credit. Thank you.
Submitted: 6 years ago.
Category: Tax
Expert:  Chad Oberg replied 6 years ago.

This area of the IRS code is complex in many ways. The following IRS Publication 535 gives an excellent introduction to the benefits to the research deduction vs. credit.

Also, the below link is very useful site that will help in your understanding.

It really depends on your situation whether the deduction or the credit is better for you. I would recommend you follow the publications examples and try to run each scenario and determine which is more beneficial. You will need to meet certain qualifications to take a credit. These qualifications are outlined in the IRS Publication 535.

If you have any more questions, please do not hesitate to contact me.