Designing innovative textiles and garments involves significant research and development (R&D). The conceptualization, creation, and testing of new fabrics and the production of prototypes to meet functional specifications are qualifying activities for the R&D Tax Credit. If there are technical issues that your company must overcome with a new design, or there are uncertainties inherent in a design process, there is a strong likelihood your R&D activities can be claimed for significant tax savings.
Employee wages, raw materials and supplies, cloud computing, and third-party contractor costs associated with R&D activities are considered qualified research expenses (QREs). Companies can receive refunds of up to 22% of total QREs through federal and state tax credits, depending on the state in which your business (or third-party contractor) operates.
Examples of qualifying activities:
- Creating new garment prototypes or test samples
- Engineering improved screen printing techniques
- Creating novel fabrics, and improving manufacturing processes to integrate new fabrics
- Evaluating ability of an existing textile to meet functional requirements
- Revising garment construction to improve quality and/or durability
- Developing novel dye formulations
- Improving technical design of shoes to improve support or functionality
Do you have these job titles on your payroll, or do you hire third-party contractors to do these jobs?
- Computer-aided Design (CAD) Personnel
- Cutters / Sewers
- Pattern Makers
- Pre-production/Production Managers
- Process Engineers
- Technical Designers
- Textile Engineers