Craft Breweries and Cideries R&D Tax Credits

Harness innovation in brewing and cidermaking to unlock tax savings. Craft breweries and cideries across the U.S. are pushing boundaries—experimenting with new yeast strains, novel fruit blends, advanced packaging systems and carbon‑reduction processes. Many of these efforts qualify for the federal R&D Tax Credit under IRC §41, and you may also be eligible for state‑level R&D incentives.

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Craft Breweries Cideries R&D Tax Credits

Examples of qualifying activities in craft breweries & cideries

New Beer or Cider Formulation Testing unconventional hops, barrel ageing, locally‑sourced fruit blends, or cider apple varietals to achieve unique flavour profiles
Fermentation & Yeast Innovation Trialing alternative yeast strains, mixed‑culture fermentations, temperature/time profiles, or co‑fermentation of cider with beer mash for hybrid styles
Bottling, Canning & Packaging Enhancements Designing and testing improved canning lines to reduce oxygen ingress, enhance shelf life, reduce flavour loss, or prototype new packaging formats (crowlers, small‑batch kegs)
Stability, Shelf Life & Quality Assurance Running shelf‑life trials under different conditions; monitoring flavour, clarity, carbonation retention over time; piloting new preservatives or natural clarifiers
Sustainability & Waste‑Reduction Projects Experimenting with spent‑grain reuse in cider mash, water‑recapture systems in brewing, CO₂ recovery systems, testing compostable packaging, energy‑efficient chillers or fermentation cooling systems
Scale‑up & Production Process Optimisation Moving from micro‑batch to commercial production: testing how pilot batches behave at 5 bbl, 10 bbl or larger scale, refining process control software, automation in keg or can lines

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What qualifies as R&D in craft brewing & cidermaking?

Craft Breweries R&D Tax Credits Beverage

To qualify, your activities must:

Pursue a permitted purpose such as a new or improved beer, cider or process (for example, a novel fruit‑infused cider, a reduced‑alcohol beer, or an improved bottling method)
Address technical uncertainty about how to achieve the desired flavour, stability, shelf‑life or packaging outcome
Follow a process of experimentation—such as pilot batches, sensory testing, fermentation parameter trials or packaging line trials
Be technological in nature, grounded in biology (yeast/fermentation), chemistry (flavour/stability), engineering (equipment/packaging) or materials science (labels/coatings)

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Qualified Research Expenses (QREs)

The IRS allows several categories of Qualified Research Expenses (QREs):

Expense Type

Examples in Brewing / Cidering

Eligibility Notes

Wages

Head brewer or cider maker, process engineer, QA/QA technician, packaging engineer directly involved in experimental batches

Direct, supervisory and support roles tied to R&D can qualify

Supplies

Special hops, unique fruit batches, yeast cultures, barrels for trial ageing, trial cans/kegs, prototype packaging materials

Supplies must be consumed in the experimental process—not routine production

Software / Cloud

Analytical software for fermentation control, batch‑yield monitoring, packaging line sensors, shelf‑life modelling platforms

Eligible if used for qualified research activities

Contract Research

External fermentation consultant, microbiology lab trials, packaging line engineering firm

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

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Roles commonly involved in qualifying activities

Masterbrewers, assistant brewers or cider makers leading formulation trials
Fermentation scientists or microbiologists developing yeast/fermentation strategies
Packaging engineers working on bottling/canning automation or new formats
Quality control/assurance technicians conducting shelf‑life, stability or clarity tests
Sustainability or process improvement leads working on waste reduction, energy efficiency or scale‑up
Research partners or external consultants performing pilot trials

What does not qualify

Routine production of beer or cider following a fixed recipe without experimentation
General marketing, branding or packaging design for aesthetic purposes (if not tied to technical experimentation)
Applying a proven process at larger scale without testing or improvement (i.e., scale‑up alone does not qualify unless there’s experimentation)
Land acquisition, routine equipment installation or normal maintenance without R&D purpose

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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.

With recent changes (such as the One Big Beautiful Bill Act) and changes to §174, it’s critical to document your R&D activities thoroughly. Documentation should include:

Trial batch plans, hypotheses, variations in ingredients, fermentation or packaging parameters
Batch logs: ingredient list, yeast/strain variations, temperature/time records, yield, sensory results, clarity/carbonation metrics
Equipment logs, packaging line test runs, data on oxygen levels, shelf‑life results, sensory alterations
Employee time allocation records: time spent on experimental batches vs routine production
Supplier/contractor invoices for trial materials, consultant reports, software usage logs

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Frequently Asked Questions

Yes. Many craft and small‑batch brewers and cider producers innovate with new recipes, fermentation/yeast techniques, packaging formats and sustainable operations—and these can qualify under the R&D tax credit rules.

Wages of staff involved in experimental activities; supplies used in testing new formulations or equipment; software used in modelling or controlling processes; and a portion of contractor expenses for external trial work.

Eligibility is not limited by size. Whether you’re a nano or micro‑brewery, a regional craft producer or a cider‑house conducting bona fide experimentation in process, product, packaging or sustainability you may qualify.

Standard recipe production without variation; routine tasting room operations; marketing campaigns; routine packaging without testing; applying fully proven methods without experimentation.

Savings vary depending on size, number of trials, level of experimentation and documentation. Industry benchmarks suggest that beverage manufacturers may raise tax credits for roughly ~18% of their R&D‑related costs. Even smaller operations conducting a handful of development batches may realise thousands of dollars in credits.

Keep detailed records of trial designs, batch logs, sensory/stability results, equipment logs, time sheet allocations, ingredient logs and process variations. These records support your claim under the IRS four‑part test (permitted purpose, technical uncertainty, experimentation, technological in nature).