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Valuable Tax Credits for Software and Technology Companies

 

Many Federal and Georgia tax credits are available to software and technology companies, though they are often overlooked and go unused. With proper planning and assessment, these credits can go a long way toward improving a company’s bottom line. Below is a summary of some of the more recognizable credits available. In the coming months we will delve into the details of each type of credit.

Research & Development (“R&D”) Tax Credit The R&D Tax Credit is a Federal credit introduced in 1981 to boost the economy. Usage became so prolific that many states, including Georgia, created their own version of the R&D Tax Credit. In general, the R&D Tax Credit helps a company offset dollar-for-dollar incremental research expenses. Companies may be eligible for the credit, for example, if they use new processes or materials in the design and implementation of new software or systems. The Protecting Americans from Tax Hikes Act of 2015 made the federal credit permanent.

Work Opportunity Tax Credit (“WOTC”) The WOTC is a Federal credit provided to employers hiring persons belonging to specific groups, and there are special guidelines with extended credit for qualified veterans. In general, the credit can be equal to 40% of first-year wages up to $6,000. The Protecting Americans from Tax Hikes Act of 2015 extended the hiring deadline to January 1, 2020, meaning the company must hire the employee and the employee must start working before that date to be counted as part of this credit.

Georgia Retraining Tax Credit The Georgia Retraining Tax Credit is only a Georgia credit. The purpose is to encourage employers to continually invest in their employees by upgrading equipment, acquiring new technology, and completing ISO 9000 training. The annual maximum credit is $1,250 per employee. This credit is available to any business that files a Georgia income tax return.

The three credits described above are not an exhaustive list and there may be more Federal and Georgia credits that apply specifically to your business. HLB Gross Collins, P.C. has been serving some of the Southeast’s most prominent software and technology companies for nearly 50 years. Our Technology Practice works closely with the clients to ensure that they are taking advantage of all available credits and savings opportunities.