R&D Tax Credit Examples for Top Industries

Whether you’re looking to increase the amount of R&D tax credits you receive for your research activities or you’re a new business just getting started, parsing out what you’ll actually qualify for can be quite frustrating and time-consuming. To preserve your energy, we’ve compiled a list of R&D tax credit examples earned by businesses in top industries at the forefront of innovation. These case studies can be a useful starting point when thinking about your company’s eligible work or even just planning ahead.

This guide is organized into five sections in which you’ll be given: 

• • The parameters for qualification
  • Common examples of eligible activities generating research credits in leading industries
  • An R&D tax credit calculation example based on our current year
  • Another credit example for the unique tax years of 2022-2024
  • Insight into how your savings can be reinvested to continue supporting your company’s growth

The first step to building your tax study is knowing the rules. Thankfully, the IRS defines qualifying activities using a straightforward Four-Part test. To claim R&D tax credits, you need to answer yes to these four questions:

1. Are you developing or improving a product, process, formula, or software?

2. Are you eliminating uncertainty by asking questions like, “Can we develop it?” or “How can we develop it?”

3. Are you systematically evaluating one or more alternatives?

4. Is your work within physical or biological sciences, engineering, or computer science?

If you’ve answered yes to all of them, congratulations! You’re cleared for the next step, which is to determine which R&D expenses can be included in your credit calculation. If you have not yet seen our comprehensive guide on identifying your qualified research expenses, take a look at a simple, but more detailed breakdown to gain better familiarity with the essentials. In a nutshell, your company will have four categories of Qualified Research Expenses (QREs):

1. Wages and labor costs – these are typically the largest part of QREs and are a percentage of Box 1 W-2 wages relating to how much time each employee spent on qualifying activities during the year.
2. Supplies used in the research process – these may be a smaller portion of QREs and are defined as any tangible, non-depreciable property used up or consumed in your development process.
3. Contract research expenditures – these expenses are payments to a non-employee for performing qualified research activities. 65% of contractor spend can be included for the credit.
4. Cloud computing and software costs – these are R&D expenses related to cloud computing and some software costs to the extent used in your process of experimentation.

a. Companies developing software for internal use should be aware there is generally an exclusion from the research credit for this activity. Businesses developing software that is not sold or licensed to customers and does not allow for interaction with third parties are required to meet an additional ‘High Threshold of Innovation’ test in addition to the four part test in order to claim a credit for this work. This test requires that the software be innovative, the development effort carries significant economic risk, and it is not already available for purchase.

R&D Tax Credit Qualifying Activities Examples

Successful credit qualifications can be found in many industries where a business is performing development activities meeting the Four-Part test. In this section, we’ve highlighted confirmed qualified research activities alongside real-world tax credit victories from some of the most common qualifying sectors.

Software Development

Many of the QREs accepted in the tech industry may not surprise you. Companies that are creating a new or improved piece of technology, an algorithm, an application or a database can make a very easy case for receiving tax credits. What’s more, your company can qualify if you’re designing or developing:

• • Code for a program
  • Mockups in the realm of UX
  • Technical design work
  • Software architecture
  • Operating systems and compilers
  • Feature enhancements
  • Relationships between software modules that are intended for:
    • Internal use
    • Serving clients
  • Improvements for internal processes and QA testing during development
    • Testing automation is included

What can these activities look like outside of this non-exhaustive list of bullet points? A recent Arvo client, a workflow management software company, improved their bottom line with the R&D tax credit. Though they offer management and maintenance services mainly to those in the property management industry, they also serve a diverse range of clients, from schools to government to manufacturing and healthcare organizations. These services involve optimizing facilities for better scheduling, maintenance, and asset management. The time this client invests in adding functionality and other improvements to their software to simplify property management for their customers is qualifying time and expense for the research credit.

Here’s another example: what if you’re running a medical startup? A recent Arvo client utilizes artificial intelligence and computer vision to establish a continuous monitoring and communication system for healthcare workers, hospitals, and patient families. Essentially, their work entails using technology to solve the problems of overburdened hospital staff and the limited access to clinical insights that comes with it. Thanks to the R&D tax credit, tech-driven solutions such as these are in better reach for small and mid-sized businesses.

Manufacturing

Qualified research activities in the manufacturing sector, much like those in tech, naturally fall somewhere along the spectrum of optimizing existing business components or the creation of new ones. For ease’s sake, we’ll categorize them as such here:

For a real-world example, we can look at a recent Arvo client which successfully claimed the R&D tax credit for improving its street, road, cemetery, and regulation sign products. They developed a new approach combining laser-cut steel, full powder-coat finishing, and reflective vinyl. The technical refinement of their street, road, and regulation signs ensures compliance with reflectivity standards while significantly enhancing long-term corrosion resistance and visual clarity.

Engineering

Engineering companies that are centered around developing, improving, and testing any variety of things should look into how elements of their work qualify. Some very common qualified research activities come from developing and testing:

• • Sustainable designs
  • Alternative structural designs or systems
  • Environmental design and impact considerations
  • Building Information Modeling (BIM)
  • Alternative heating, cooling, ventilation, lighting, water, or electricity systems
  • Waste disposal processes

Let’s break down the qualified research activities of a recent Arvo client that was able to claim an R&D tax credit by applying innovative design work across residential projects. This included testing and developing tall stud wall designs for roof support, redesigning framing systems to accommodate the added weight of rooftop solar panels, and evaluating truss reinforcement options for attic-mounted mechanical units. Each project required experimentation and iteration to solve structural challenges, exactly the kind of activities the tax credit is intended for.

Architecture

In 2023, the US Tax Court case, Harper v Commissioner, the court concluded that the complex engineering and design work done by architects can be qualifying research for the Federal Research credit. As a result, many activities of companies in this sector can be considered for the research credit. Things like ensuring your designs and materials meet LEED standards, satisfy complex requirements, or are otherwise optimized are common architecture activities that may be qualifying activity. Using tools like BIM and computational analysis tools for project assessments may also be eligible work. In addition to these activities, you can also qualify for the development and testing of:

• • New or improved designs
  • Optimal designs for lighting, acoustical, or visual qualities within a structure
  • Schematic designs, site plans, and elevation drawings
  • Areas for building systems
  • Environmentally friendly buildings

Here’s a practical example of how a recent Arvo client in architecture qualified for the R&D tax credit by transforming a dark, closed-off warehouse into a bright, collaborative workplace. The team experimented with design strategies to bring in more daylight and exterior views, using 3D CAD modeling to test and visualize different space-planning approaches before settling on the optimal solution. By rethinking layouts and refining designs, they vastly improved the space’s functionality and created an open, energizing environment that boosted employee morale and encouraged spontaneous collaboration.

Other Industries

If your industry’s common qualified research activities weren't included in this guide, check out this more comprehensive list of well-known qualifying activities by industry. You’ll discover there are many credit opportunities available to a wide variety of companies.

R&D Tax Credit Calculation Example

Now that you have a better view of the QRE landscape, it’s time to talk about hard numbers. The total amount of your qualified research expenses determines how much R&D tax credit you can claim, which is typically around 7–10% of those costs. If that sounds insignificant, let’s look at a simple example to see how this figure can have quite an impact.

This is real money that you can turn around and reinvest right back into your company!

R&D Tax Credits from 2022-24 Calculation Example

If you were conducting research and development activities during the tax years 2022 to 2024, you were probably disappointed by the change in rules that required amortization of R&D expenses over five years. As of 2025, not only is that rule no longer in place, but some businesses can retroactively file for those deductions and credits before July 6, 2026. Even if your business doesn’t qualify for the retroactive deductions, there’s thankfully another option. All taxpayers can now make an election with their 2025 tax return to deduct their unamortized R&D expenses using a “catch-up” deduction, which allows those costs to be recovered in full in one year or split evenly over two tax years.

What could your refund look like? Say your qualifying information looks like this:

Your savings could come out to be $67,200 for 2022, $84,000 for 2023, and $84,000 again for 2024. That’s a total of $235,200, an amount worth chasing after!

How R&D Tax Credit Savings Can Be Reinvested

You can leverage your tax credits in several ways, which will depend entirely on your company’s goals and priorities. For some, the credit helps extend the runway. For others, it’s a source of capital to reinvest in innovation. Rather than viewing the credit as just a tax benefit, many businesses see it as a strategic tool in their long-term planning. What matters most to you at your current stage of growth?

“This will help limit cash burn, which is huge as we are still pre-funding.” –Mike O’Brien, LookDeep Health

For startups in particular, R&D tax credits can provide meaningful short-term relief. If you didn’t already know, it’s actually a common misconception that a business has to be profitable to leverage tax credits. This relief for startups is thanks to the PATH Act of 2015, which is intended to help qualified startups and small-businesses keep their heads above water. When the tax credit is applied as a payroll tax offset, it can lower ongoing expenses and help conserve cash during pre-funding or early funding stages. This added flexibility allows teams to stay focused on development without putting additional strain on limited resources.

“We will put the R&D tax credit dollars into our CardioFlux FAC system, which was recently FDA cleared.” –Chandan Srivastava, Genetesis

More established or rapidly growing businesses often reinvest their savings right back into product and technology development. Some use the funds to accelerate improvements to newly approved or launched systems, while others view the credit as cash that strengthens the balance sheet.

“I view the R&D tax credit as cash in the business – a cash balance item. This can be a substantial tax credit for businesses and it’s definitely worth the effort required to go after it.” – Jeff Wilkins, FMX

In fast-moving companies where attention is often centered on sales and customer delivery, the R&D tax credit can also help ensure critical operational and back-office investments aren’t forgotten.

Claim Your Credit with Confidence

All the companies mentioned in this guide are employing innovative techniques to solve real-world challenges. If that sounds like your business, seize the tax credits available to you! Too often, businesses who qualify overlook these opportunities or underclaim simply because the rules feel complex. In fact, 80% of qualifying businesses don’t even believe that they do! Working with an experienced professional to build your tax study is the easiest way to ensure you're not leaving any money on the table and at the same time reducing audit risk. The best part: once you’ve established a reliable process for documenting eligible activities for the credit, it becomes an easily repeatable, long-term growth strategy.