Takeaway: Tax credits are a great incentive for small businesses and independent inventors to file patents.
As of 1981, the federal Research and Development (R&D) Tax Credit allows a tax credit of up to 13 percent of eligible spending for new and improved products and processes. In order to qualify for the tax credit, research must meet the following four criteria: New or improved products, processes, or software development; technological in nature; elimination of uncertainty; and process of experimentation.
President Obama signed a bill on December 18, 2015, making the R&D Tax Credit permanent and in 2016, it was implemented to be used to offset the Alternative Minimum tax. Startups can utilize the credit against $250,000 in payroll taxes per year. These tax credits are available for a wide range of expenses in association with the production of patents. Consult your tax attorney to see if this is a benefit to you.