Innovation That Pays You Back!

September 10, 2025•3 min read

R. Kenner French emphasizes that many entrepreneurs are "leaving money on the table" by overlooking the Research and Development (R&D) tax credit. He explains that even experienced CPAs sometimes forget about it, highlighting how often business owners miss out. Unlike a deduction, this incentive is a dollar-for-dollar credit against taxes, meaning direct savings. Kenner stresses that entrepreneurs—especially those experimenting with AI or improving business systems—are prime candidates to benefit.

He outlines that R&D tax credits are a U.S. government incentive to propel innovation and economic growth. Eligible activities must be based in the U.S. and can include developing new products, processes, or services, or even enhancing existing ones. Work done overseas, however, does not qualify. He provides real-world context, noting how even his company missed out on credits when hiring researchers abroad. The key takeaway: if innovation is happening domestically, it may qualify.

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Kenner details qualifying expenses such as salaries and wages of research staff, supplies like computers used for testing, contract research, and even a portion of overhead costs like utilities. He demonstrates the impact with a simple example: if a company owes $100,000 in taxes and claims $10,000 in R&D credits, the liability drops to $90,000. This means improved cash flow for businesses, along with the added societal benefit of fueling innovation.

The process of applying requires identifying R&D activities, documenting expenses, and calculating eligible credits. He advises tracking R&D efforts regularly instead of scrambling at year-end and working with qualified advisors to maximize results. Importantly, businesses can often retroactively claim credits for the past two or three years. Staying proactive is critical, since tax laws evolve over time.

Finally, Kenner highlights industries that commonly qualify, including pharmaceuticals, tech startups, and manufacturing. He encourages entrepreneurs to see R&D not just as a compliance item but as a way to market themselves as innovators with a competitive edge. He's central message is clear: properly identifying and claiming R&D tax credits can lower taxes, increase cash flow, and help entrepreneurs play a meaningful role in advancing society.

Takeaways

• Many entrepreneurs are unaware of R&D tax credits.

• R&D tax credits can significantly reduce tax liability.

• Eligibility includes developing new products or processes.

• Expenses related to R&D can be claimed for tax credits.

• It's essential to consult with a tax professional about R&D credits.

• R&D tax credits can improve cash flow for businesses.

• Innovative projects are incentivized by the government.

• Documentation of R&D activities is crucial for claiming credits.

• Businesses can retroactively claim R&D credits for previous years.

• R&D tax credits can provide a competitive edge in the marketplace.

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