Satellite Technology R&D Tax Credits

Power up your next generation of space-based infrastructure. U.S. companies designing satellites, payloads, or ground systems often qualify for the federal R&D Tax Credit under IRC §41. Whether you’re developing new constellation architectures, prototyping AI-enabled payloads, or optimizing inter-satellite communication, these projects may unlock significant tax savings.

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Examples of Qualifying Satellite R&D Activities

Miniaturized Bus Development (CubeSats, SmallSats) Engineering lightweight satellite platforms with efficient heat dissipation, structural rigidity, and modular power/data subsystems.
Advanced Payload Integration Designing hyperspectral sensors, SAR modules, GNSS receivers, or AI-enabled cameras — and solving mass, power and data constraints under orbital conditions.
Station-Keeping & Propulsion R&D Testing electric/colloid thrusters, refining ADCS algorithms, or validating autonomous reorientation under fluctuating orbital drag conditions.
Inter-Satellite Link & Comms Engineering Prototyping optical ISLs, validating latency across networked constellations, experimenting with regenerative vs. bent-pipe architectures.
In-Orbit Edge Processing & AI Payloads Embedding onboard compute for processing Earth observation data, compression algorithms, or real-time anomaly detection in LEO/MEO satellites.
Ground Segment System Integration Developing handover logic for multi-ground station links, auto-scheduling software, or integrating SatCom feeds with terrestrial networks.

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What Qualifies as R&D in Satellite Technology?

Your development activities may be eligible if they:

Pursue a permitted purpose — such as creating or improving a satellite platform, payload configuration, onboard software system, or ground station integration method.
Address technical uncertainty — e.g., “Will this thermal strategy prevent overheating in LEO?”, “Can we maintain data integrity on an edge-compute payload with 25% less power?”, “Is our antenna deployment sequence reliable in microgravity?”
Follow a process of experimentation — like prototype iterations, simulation/modeling, lab-based subsystem testing, or on-orbit demonstration.
Are technological in nature — rooted in RF/electronics engineering, aerospace systems, materials science, embedded software or space communications.

If your work involves testing, iteration or new problem-solving — not just deploying a known solution — you may be conducting qualifying R&D.

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Qualified Research Expenses (QREs)

Expense Type

Satellite-Specific Examples

Notes

Wages

Satellite platform engineers, payload designers, RF specialists, mission software developers

Direct, support, and supervisory roles may qualify

Supplies

Prototyped PCBs, sensors, testbed materials, thermal hardware

Must be used in experimentation or development

Software / Cloud

Comms simulations, thermal models, orbital propagators, AI model training tools

Eligible if tied to qualified research

Contract Research

Labs performing radiation testing, EMC tests, or vacuum cycle evaluations

A portion may qualify if contractual rights/risk are retained

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Common Roles Involved in Satellite R&D

Satellite systems and payload engineers
RF & communications engineers
Embedded software or AI developers
Ground station integration leads
Environmental/thermal test engineers
Simulation specialists (orbit, link, thermal, power)

What does not qualify

Routine satellite production or replication of known configurations
Using commercial off-the-shelf components with no modification
Sales, procurement, regulatory, or investor relations activity
Building infrastructure or ground stations not tied to R&D trials
Activities performed under a contract where all technical risk and IP ownership belong to another party

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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.

‍Recommended Documentation:

Project objectives and design iteration logs
Link budget analyses, comms test data, EMI shielding results
Environmental (vacuum, thermal) test records
Time logs for R&D staff and subsystem contributors
Version control of AI models, RF boards, antenna designs
Change-tracking and rationale for design reworks or system tradeoffs

Strong documentation supports credit eligibility and audit readiness.

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Frequently Asked Questions

Yes — if they’re developing new satellite buses, payloads, communications systems, or network software under conditions of technical uncertainty and experimentation.

Engineer and test team wages, prototyping materials, R&D modeling software, and outside lab testing — if directly tied to your development efforts

Standard satellite manufacturing without redesign, non-technical admin or business tasks, or deploying known commercial hardware without testing/modification.

Federal credits often return 10%–15% of qualified research expenses. With proper documentation and state incentives, total benefit can be even higher.

Logs of orbital simulations, payload integration trials, subsystem test results, engineering rework decisions, and time allocation records are key for claim defense.