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.
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.
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.
Qualified Research Expenses (QREs)
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
Compliance and Documentation
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.
Frequently Asked Questions
Yes — when they develop new materials, smart packaging sensor systems, automation processes or sustainability redesigns rather than simply repeating existing packaging formats.
Wages of engineers/scientists doing packaging R&D, prototype materials or sensors, software/simulation/analytics tools, contract vendor costs for testing or pilot automation.
Routine packaging production with existing formats, routine line operations, general business or administrative tasks.
Maintain logs of material testing, automation/trial run results, sensor‑integration outcomes, employee time by project, supply consumption tied to experimentation.
Next Steps
Use our calculator to estimate your potential federal and state benefits
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