Qualifying expenses for the R&D credit include:
- Wages – Box 1 W-2 wages paid to internal employees for directly performing, supervising, or supporting qualified research.
- 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.
- Contract research – expenses paid to third parties for qualifying research. These expenses are eligible for inclusion at a rate of 65%.
- 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.).