Packaging R&D Tax Credits

Innovate your packaging design, materials development and automation workflows. Packaging manufacturers and converters across the U.S. are developing new materials, smart packaging systems, sustainable processes and high‑speed automation. Many of these initiatives meet the criteria for the federal R&D Tax Credit under IRC §41, with additional state‑level opportunities.

Estimate your Credits Book a Consultation

Examples of qualifying activities in packaging

Material innovation Testing bio‑based or compostable films, barrier coatings, lightweight structures, shelf‑life extension via new coatings or film laminations.
Smart packaging & sensor integration Embedding temperature/humidity sensors, freshness indicators, IoT connectivity, vision‑inspection systems to monitor integrity.
Automation & workflow optimisation Developing or integrating robotics, quick‑change tooling for flexible runs, high‑speed inspection, side‑by‑side change‑over trials.
Sustainability & process redesign Reducing packaging material usage, recycling content trials, evaluating carbon‑reduction films, performing lifecycle/transportation drop tests.
Prototyping & testing Bench‑to‑pilot trials of new packaging formats, drop/transportation testing, accelerated ageing, performance testing under varied conditions.

Speak to an Expert

What qualifies as R&D in packaging operations?

To qualify, your packaging activities must:

Aim at a permitted purpose — such as a new or improved packaging material or structure, smart packaging sensor integration, sustainable/eco design, new automation for packaging lines or improved material‑handling systems.
Tackle technical uncertainty — for example: “Can this bio‑based film meet barrier specifications under high‑humidity shelf‑life conditions?”, “Will the sensor‑enabled packaging reliably detect integrity across distribution?”, “Can the new automation line reduce change‑over time while maintaining quality at high throughput?”
Use a process of experimentation — material prototypes, side‑by‑side film or structure testing, automation line trials, sensor/vision‑inspection integration benchmarking, sustainability material yield testing.
Be technological in nature, grounded in materials science, mechanical/automation engineering, sensor/vision systems, packaging materials technology or process engineering.

Get a Free Assessment

Qualified Research Expenses (QREs)

Expense Type

Examples in Packaging R&D

Eligibility Notes

Wages

Materials engineers, automation/robotics engineers, packaging scientists, sensor integration engineers

Directly engaged in research activities

Supplies

New film materials, packaging prototypes, sensor modules, test containers, pilot‑line consumables

Consumed in experimentation or pilot testing

Software / Cloud

Simulation tools for material behaviour, automation programming, vision‑inspection analytics

Eligible when used for qualified research

Contract Research

External labs for material barrier testing, automation vendors, sensor‑integration labs

Subcontracted vendor costs generally qualify

Estimate your Credits

Roles commonly involved in qualifying activities

Materials scientists and packaging/material engineers
Automation and robotics engineers, process engineers
Sensor and electronics engineers for smart packaging solutions
Sustainability/lifecycle engineers, packaging trial specialists
Project leads managing prototyping, pilot runs and testing workflows

What does not qualify

Routine packaging production or line runs without innovation or experimentation
Standard line operations with no documented trial or redesign process
Purely administrative, sales or marketing functions
Purchase of standard equipment not tied to a documented experimental program

Speak to an Expert

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.

Document thoroughly:

Prototype and material test logs, side‑by‑side comparisons of new vs. existing packaging designs, pilot run data, automation trial logs
Sensor/IoT integration test results, durability/transportation test logs, sustainability trial data (recycled content/degradation)
Employee time tracking by R&D task, supply usage logs tied to prototypes/trials, version histories of material or automation workflows These records support the four‑part test and improve audit defensibility.

Schedule a Call with an Expert

Frequently Asked Questions

Do packaging manufacturers or converters qualify for the R&D Tax Credit?

Yes — when they develop new materials, smart packaging sensor systems, automation processes or sustainability redesigns rather than simply repeating existing packaging formats.

What expenses can be claimed?

Wages of engineers/scientists doing packaging R&D, prototype materials or sensors, software/simulation/analytics tools, contract vendor costs for testing or pilot automation.

Which activities do not qualify?

Routine packaging production with existing formats, routine line operations, general business or administrative tasks.

How should packaging teams document research?

Maintain logs of material testing, automation/trial run results, sensor‑integration outcomes, employee time by project, supply consumption tied to experimentation.