Blockchain R&D Tax Credits

Advance your innovation in distributed ledger technology. Blockchain development companies and enterprises across the U.S. are continuously building next‑generation ledgers, smart contracts, decentralized applications (dApps) and secure transaction platforms. Many of these activities qualify for the federal R&D Tax Credit under IRC §41, with additional state‑level opportunities.

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Examples of qualifying activities in blockchain development

New Blockchain or Ledger Architecture Designing a novel blockchain protocol (e.g., proof‑of‑stake variant), or customizing a ledger to improve throughput, latency or energy use.
Smart Contract & dApp Development Building and testing advanced smart contract systems, decentralized logic, wallet/contract interaction flows, cross‑chain bridges.
Security & Cryptography Research Experimenting with new cryptographic primitives, consensus integrity, ledger immutability enhancements, data privacy in decentralized systems.
Distributed Infrastructure & Node Engineering Developing peer‑to‑peer network architectures, optimizing nodes, wallets, API infrastructure that supports blockchain deployments.
Integration & Interoperability Solutions Addressing technical uncertainty in cross‑chain communication, ledger interoperability, tokenization components, enterprise‑blockchain integration.
Scalability / Performance / Sustainability Projects Projects that aim to reduce energy usage, increase transaction per second, reduce latency or improve resource use in mining/ledger operations.

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What qualifies as R&D in Blockchain Technology?

To qualify, activities must:

Pursue a permitted purpose such as a new or improved product, process, or technique (for example, a novel consensus mechanism, a high‑throughput ledger, or a secure wallet architecture).
Address technical uncertainty about capability, method or design (e.g., can the blockchain scale, can smart contracts interoperate, can latency be eliminated, can cryptography be strengthened?).
Follow a process of experimentation through prototyping, simulation, peer‑to‑peer testing, iteration, or stress testing.
Be technological in nature, grounded in computer science, cryptography, distributed systems, ledger engineering or software/hardware design.

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Qualified Research Expenses (QREs)

The IRS and state programs allow several categories of Qualified Research Expenses (QREs) that may be claimed:

Expense Type

Examples in Blockchain Development

Eligibility Notes

Wages

Blockchain engineers, cryptographers, QA/test engineers, research scientists

Direct, supervisory and support roles in the experimentation phase qualify

Supplies

Specialized hardware (e.g., nodes, ASICs/GPUs if custom), data sets, ledger test platforms

Must relate to the research process—not routine operations

Software / Cloud

Cloud compute time for ledger simulation/training, node clusters, smart‑contract testing frameworks

Eligible when used for qualified research tasks (not general ops)

Contract Research

Payments to third‑party research labs or blockchain specialists conducting experiments on behalf of the taxpayer

Often only ~65% of contractor cost may be claimed, depending on contract

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Roles commonly involved in qualifying activities

Blockchain Protocol Engineers, Distributed Systems Researchers
Smart Contract Developers, dApp Architects, Wallet Engineers
Cryptography Specialists and Security Engineers
DevOps / Infrastructure Engineers managing node networks or ledger clusters
Analytics/Data Scientists modelling crypto flows
External crypto research labs or academic partners

What does not qualify

Routine ledger deployment or standard wallet implementation without experimentation or innovation
Adopting an off‑the‑shelf blockchain solution without technically advancing it
General business, management, marketing, or administrative tasks
Infrastructure/land purchases not tied to documented R&D experimentation

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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.

Maintain robust documentation:

Project briefs/hypotheses (e.g., “Can the new cross‑chain bridge support 5k TPS with <50ms latency under adversarial testing?”)
Testnet logs, simulation results, iteration/version history, failure logs and redesigns
Time tracking of personnel by project and research vs non‑research allocation
Resource usage documentation (nodes, compute hours), wallet key‑management trial logs, smart‑contract test logs This supports the four‑part test (permitted purpose, uncertainty, experimentation, technological) for R&D under §41.

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Frequently Asked Questions

Do blockchain development companies qualify for the R&D Tax Credit?

Yes — if the company is actively engaged in developing or improving blockchain technologies, smart contracts, infrastructure, or tackling technical uncertainty via experimentation, then activities can qualify under §41.

Which expenses can be claimed?

Employee wages for engineers/analysts in experiment projects, supplies (hardware, wallet nodes etc.), cloud compute and third‑party contract research fees (subject to limits).

What kinds of blockchain projects are eligible?

Projects involving creation of new ledger protocols, smart contract platforms, decentralized app frameworks, cross‑chain integration, performance/scalability enhancements, or novel cryptographic/security features.

What activities do not qualify?

Routine wallet deployment, standard token issuance without innovation, marketing/promotional efforts, and purely operational maintenance.

How much might a blockchain company save?

Savings vary depending on size of business, scope of innovation, and documentation rigour. In some cases, companies targeting blockchain/digital asset development have claimed substantial credits by properly documenting their experimentation and development efforts.

How should blockchain firms document research?

Maintain clear project charters defining the technical problem or uncertainty, logs of development and testing, compute/hardware usage records, time allocation by research vs non‑research roles, contract research agreements, and summary of results/outcomes. This supports audit defence and compliance with §41 standards.