Does your Dental Practice Qualify for the R&D Tax Credit?
November 16, 2021
At a glance:
- The main takeaway: The R&D Tax Credit provides a lucrative benefit to any company that’s developing or improving products, processes, and techniques – even dental practices may qualify.
- How dental differs: Dental practices that develop new techniques, improve procedural processes, implement new technologies, or conduct innovative research are likely to qualify.
- Next steps: Read more to understand how dental practices’ daily activities might qualify for R&D and how your practice can maximize its potential benefit.
Wondering if your dental practice may qualify for the R&D Tax Credit? Contact Aprio’s R&D Tax Team today!
The full story:
Most people assume that the R&D Tax Credit is reserved for a stereotyped version of research and development, like the type of work done in a laboratory by teams of researchers in white coats and safety goggles. In reality, any company that designs, develops, or improves products, processes, techniques, formulas, or software may qualify – even dental practices.
With companies saving billions of dollars every year through the R&D Tax Credit, it’s worth exploring whether your practice might qualify.
Take a closer look at what activities can qualify
If your dental practice invested in innovating new techniques, developing improved procedures, or resolving unique patient issues, you might be eligible for this lucrative tax incentive. To make qualifying even easier, none of these developments or improvements needs to be new to the dental industry as a whole – they only need to be new to your practice.
Such broad stipulations mean many types of informative research or process improvements can qualify, as long as they are technical in nature. This disqualifies any routine procedures or back-office process improvements, but it opens the door to a variety of activities that many dental practices engage in to improve patient care.
For instance, while simply introducing new technologies into your practice, like 3D printing, is not considered R&D, efforts related to innovating processes around those technologies, such as developing new techniques or procedures utilizing 3D printing technology, could qualify.
Other common activities in the dental industry that may qualify for the R&D Tax Credit include:
- Developing innovative prototypes
- Non-routine dental procedures
- Patenting cutting-edge techniques
- Experimental process improvements
- Implementing advanced dental technologies
- Testing new materials
If any of these activities sound familiar, it’s time to bring in a professional who can help assess your practice’s eligibility.
Understanding the potential benefits
Qualifying for the R&D Tax Credit can help your practice increase cash flow, boost profitability, or fund additional innovation. The R&D Tax Credit encompasses a Federal credit that any eligible business can claim in addition to 35 individual State credits for companies operating within those states. All R&D Tax Credits result in an immediate benefit to your practice by providing a dollar-for-dollar offset against taxes owed or paid.
The value of your practice’s R&D Tax Credit depends on how much you invest in qualifying activities. The credit is based on a range of eligible costs, including employee wages, qualifying supplies, and even expenses towards contractors performing R&D. Dental practices with a higher number of employees with technical backgrounds are often likely to see higher credits.
However, the most influential factor in the final value of your credit comes down to who you trust to calculate your credit. The credit’s broad qualifications mean more companies can benefit from the incentive; however, it also results in more nuances and subjectivity within the eligibility requirements, leading to more opportunities to undervalue your credit. Partnering with a dedicated team of R&D Tax Credit professionals gives you a better chance of capturing every possible cent in your final credit and brings peace of mind that your credit was calculated within all the legal boundaries of the tax code.
If you think your dental practice may qualify, contact Aprio’s R&D Tax Credit team and let us start an assessment to evaluate your eligibility.
Our team can help your practice decide if the R&D Tax Credit is right for you and provide a full-service study to calculate, substantiate, and defend your credit. We can also help identify other incentives you may qualify for and build a holistic tax credit strategy that maximizes your total benefit.
About the Author
Carli is the partner-in-charge of R&D Tax Credit Services at Aprio. Carli has dedicated the last five years to performing R&D Tax Credit studies for clients in a variety of industries, with a specialty in the manufacturing and technology industries. She has worked to prepare R&D Tax Credits for companies ranging from startups to Fortune 500 businesses, performing technical interviews with subject matter experts, calculating complex credits and preparing technical reports.