Building a platform, designing architecture, solving performance and integration problems, most of what your engineers do to make software work is exactly what the credit rewards. Software is one of the largest R&D credit categories there is.
Request a Complimentary AssessmentDeveloping new software, or meaningfully improving existing software, almost always involves technical uncertainty: whether an architecture will scale, how to hit a performance target, whether an approach will even work. That is the heart of the credit. From platform builds to algorithms to infrastructure, a large share of engineering payroll typically qualifies.
Designing a new system architecture to meet scale and reliability targets under real uncertainty.
Re-architecting a service to hit latency or throughput goals off-the-shelf approaches couldn’t.
Building a novel integration where the technical path wasn’t clear at the outset.
First, funded work: if you build software for a client who bears the risk and owns the result, it may be “funded research” and excluded, company-owned product work generally qualifies. Second, internal-use software, built to run your own business, faces a higher bar, the three-part “high threshold of innovation” test, on top of the usual four. Routine bug fixes, configuration, and maintenance don’t qualify at all.
A new or improved software product, feature, or capability.
Grounded in computer science and software engineering.
It was uncertain whether, or how, the technical goal could be achieved.
Resolved through design, prototyping, testing, and iteration.
Any company writing software to solve technical problems can qualify. Development inside a non-tech business often qualifies too.
It depends on the contract, if the client bears the risk and owns the IP, it may be funded research. We review the terms.
Internal-use software can qualify but faces a higher innovation threshold. We apply that test where it’s needed.
This page is general information, not tax or legal advice. Whether specific activities and expenses qualify depends on the taxpayer’s facts and applicable law, and is determined through the appropriate R&D study. Novaric does not guarantee eligibility, credit amounts, or any IRS outcome.