Qualifying expenses for the R&D credit include:

  1. Wages – Box 1 W-2 wages paid to internal employees for directly performing, supervising, or supporting qualified research.
  2. Supplies – any tangible property used or consumed in the active conduct of R&D activities.  Qualifying supplies do not include land or improvements to land, and depreciable property.
  3. Contract research – expenses paid to third parties for qualifying research.  These expenses are eligible for inclusion at a rate of 65%.
  4. Computer expenses – expenses are those directly related to software development efforts based in the United States prior to release (i.e. QA, testing, staging, development, etc.).