Architecture R&D Tax Credits

Empower architectural innovation. Architecture and design firms across the U.S. are increasingly advancing new materials, building systems, digital processes, and high‑performance design strategies. Many of these efforts qualify for the federal R&D Tax Credit under IRC §41, with support from state‑level incentives as well.

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Examples of qualifying activities in architecture and design

Façade & Envelope Innovation Testing new façade assemblies, dynamic shading systems, high‑performance glazing or adaptive envelope technologies.
Integrated Building Systems Experimenting with novel HVAC/ventilation systems, smart‑sensor networks, façade‑MEP integration or IoT‑enabled controls within buildings.
Digital Design & Fabrication Methods Utilising BIM/parametric design workflows, digital‑fabrication of components, 3D‑printed architectural elements or robotic assembly prototypes.
Sustainability & Resilience Research Developing building designs for extreme climates, passive‑house‑level energy performance, carbon‑sequestering materials, flood‑ or wind‑resilient structures.
Adaptive Reuse & Modular Design Creating modular architectural systems, retrofit workflows for existing buildings, reusable components, or flexible floor‑plates that support varied uses over time.
Site Optimization & Complex Geometry Resolving unique site constraints, irregular geometry, mixed‑use integration, or structural innovations in large‑span buildings or unusual forms.

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What qualifies as R&D in the architecture & design industry?

To qualify, activities must:

Pursue a permitted purpose — such as a new or improved design concept, building system, material innovation or workflow
Address technical uncertainty about how to achieve design performance, structural integrity, environmental adaptation or digital integration
Follow a process of experimentation — via design iterations, modeling/simulation, prototype mock‑ups or fabrication testing
Be technological in nature — grounded in structural engineering, materials science, environmental design, digital modelling or integrated systems

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Qualified Research Expenses (QREs) — what you can claim

The IRS allows several categories of QREs in architecture/design firms:

Expense Type

Examples in Architecture & Design

Eligibility Notes

Wages

Project architects, engineers, BIM/modeling staff, design technologists directly engaged in experimental work

Personnel must be actively involved in experimentation or technical risk resolution

Supplies

Mock‑up components, advanced façade materials, sensor hardware, prototype modules

Items must be consumed or utilised in the research process

Software / Cloud

Simulation tools (energy/structural), parametric design software, digital‑fabrication platforms, cloud‑based modelling datasets

Must be used for qualified research tasks

Contract Research

Third‑party materials testing labs, structural wind‑tunnel studies, façade performance consultants

A portion (often ~65%) of contract costs may be claimed

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Roles commonly involved in qualifying activities

Design directors leading innovation in building systems and form
Project architects and technologists working on experimental façades or envelope systems
Structural, mechanical, electrical, environmental engineers developing integration of building systems
BIM/modeling specialists and digital fabrication teams developing parametric or custom components
Research partners: university labs, materials test labs, façade engineering consultants

What does not qualify

Routine architectural services using standard designs without experimentation
Traditional design/production deliverables or administrative tasks
Construction‑based activities once design is fixed and no further experimentation occurs
Standard renovations or fit‑outs using known systems without technical uncertainty or new design methods

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Compliance and Documentation

§174 Update

Following the One Big Beautiful Bill Act (OBBBA) signed July 4, 2025, §174 now allows immediate expensing of domestic research expenses for tax years beginning on or after January 1, 2025. Taxpayers may also elect optional amortization under new §174A. Foreign research expenses must still be amortized over 15 years. This is separate from the §41 credit but impacts overall tax planning.

‍Documentation best practices for architecture/design firms include:

Project narratives that define the technical uncertainty and how experiments were structured
Records of design iterations, simulation results, mock‑up testing data, fabrication prototypes
Time logs showing employees’ hours on qualifying tasks, project‑codes tying to research activities
Contracts showing the firm’s risk/rights in experiments (especially for client engagements) and documentation of how new methods were developed Robust documentation supports the IRS “four‑part test” and strengthens audit readiness.

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Frequently Asked Questions

Do architecture firms qualify for the R&D Tax Credit?

Yes — architecture and design firms can qualify when they engage in technical‑innovation, design experiments, material or system development, or digital workflow improvements.

What expenses can be claimed?

Eligible expenses include wages of staff involved in experimental design work, prototype materials, simulation software, digital‑fabrication costs and contract research engagements.

What design activities qualify?

Activities such as: new façade systems, parametric design workflows, high‑performance envelope engineering, integrated building systems, adaptive reuse methods, and new digital fabrication techniques.

What activities do not qualify?

Routine design deliverables without experimentation, standard construction documentation without innovation, administrative and marketing tasks, or renovations that use known engineering solutions without development of new methods.

How should architecture/design firms document research?

Maintain project‑level narratives describing the technical uncertainty, track design/simulation iterations, mock‑up tests or prototypes, capture employee time tied to research tasks, and retain materials or simulation logs. Proper documentation is critical.

How much can architecture firms typically save?

Savings vary widely. Smaller firms focusing on a few experiments may see tens of thousands in credits; larger firms with systematic R&D across many projects may capture significantly more. By properly documenting a portfolio of innovations, firms unlock higher credit values.