Telecommunications R&D Tax Credits

Power innovation in connectivity and communications. Telecommunications companies, network providers, hardware/software vendors and service platforms are continuously developing new standards, protocols, network infrastructure and IoT/edge expansions. Many of these efforts meet the criteria for the federal R&D Tax Credit under IRC §41 and state incentives.

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Examples of qualifying activities in telecommunications R&D

5G/6G Wireless Modulation & Network Trials Creating and testing new modulation schemes, beam‑forming arrays, massive MIMO prototypes, latency/stability trials.
IoT/Edge‑Network Platform Development Building and testing platforms that manage thousands of devices, burst‑traffic simulations, edge compute integration, low‑power connectivity trials.
Network Automation & AI/ML for Telecom Developing AI/ML systems that optimise network routing, self‑healing networks, interference management, experimental modelling.
Satellite / High‑Altitude Platform Networks (HAPS) & New Band Spectrum Trials Prototyping new spectrum bands, hardware/software integration for satellite/IOT networks, field testing in harsh conditions.
Network Security & Throughput Optimisation Designing protocols to resist attacks, validating latency and throughput improvements under stress, testing fibre/optical network upgrades.

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What qualifies as R&D in Telecommunications?

Telecommunications R&D Innovation Projects

To qualify, telecommunication‑related R&D must:

Aim at a permitted purpose — such as a new wireless protocol (5G/6G), network‑management architecture, IoT connectivity platform, edge‑compute network optimisation, or next‑gen modulation/beam‑forming systems.
Tackle technical uncertainty — for example: “Can we maintain 10 Gbps mobile throughput under 6G with < 1 ms latency?”, “Will the beam‑forming array adapt in urban multipath environments reliably?”, “Can the edge‑network manage massive IoT device burst traffic while maintaining latency and reliability?”
Use a process of experimentation — lab trials, network test‑beds, simulation/modelling of propagation and load, iterative algorithm/hardware tweaks, field/trial deployments.
Be technological in nature, grounded in communications engineering, signal processing, network architecture, software/hardware for telecom, IoT/edge computing, modulation or antenna design.

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Qualified Research Expenses (QREs)

Expense Type

Examples in Telecom R&D

Eligibility Notes

Wages

Communications engineers, signal‑processing researchers, IoT/edge software engineers, field trial coordinators

Research, supervisory and support roles qualify

Supplies

Prototype RF hardware, antenna arrays, IoT gateway boards, optical modules, test‑bench equipment

Materials used in experiments/trials

Software / Cloud

Network simulation software, edge‑compute test environments, AI/ML training for networks, test‑bed cloud compute

Eligible if tied to qualified research

Contract Research

External labs for RF/spectrum testing, IoT/edge network vendors, field trial vendors

Up to ~65% of contractor costs may qualify

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Roles commonly involved in qualifying activities

Communications / RF Engineers & Scientists
Network Architecture Engineers (5G/6G, IoT, Edge)
Software/AI Engineers focused on network optimisation
Field Trial/Test Engineers & Data Scientists
IoT/Edge Connectivity Engineers
External research partners or labs for spectrum/hardware trials

What does not qualify

Routine build‑out of standard network infrastructure without documented experimentation
Using off‑the‑shelf telecom modules without innovation or testing under uncertainty
General business, marketing, logistics, or install/maintenance tasks
Infrastructure purchases and standard deployment without testing or experiment documentation

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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.

Key documentation should include:

Project summaries/hypotheses (e.g., “Can the 6G beam‑forming prototype reduce signal loss by 30 % in dense urban environments?”)
Test‑bed logs, field trial data, iteration/version history of hardware/software, failure/re‑design records
Staff time logs by project and research vs non‑research tasks, payroll coding
Material/test‑equipment usage records, simulation/trial data, external test reports This supports the Four‑Part Test (permitted purpose, uncertainty, experimentation, technological) and audit readiness.

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Frequently Asked Questions

Yes — if they engage in truly experimental work, developing new protocols, hardware, networks, or connectivity platforms rather than standard infrastructure deployment.

Wages of engineers and researchers, supplies used in prototypes/trials, cloud/simulation costs, and third‑party contract research.

Examples include 6G/IoT/edge‑network development, modulation algorithm testing, antenna or RF hardware prototyping, network automation via AI/ML, satellite or HAPS connectivity trials.

Routine network build‑out, standard maintenance or installation work, simply deploying off‑the‑shelf modules without experimentation, business/logistics tasks.

Maintain clear project objectives with technical uncertainties, logs of prototypes/trials/simulations, iteration history, test‑bed data, time tracking and external research documentation.