Drive innovation in tooling, dies, and precision manufacturing. Tool & die shops, stamping operations, die‑casting toolmakers and precision‑tool producers across the U.S. are developing new tooling systems, additive‑tooling integration, smart dies, and manufacturing automation. Many of these activities qualify for the federal R&D Tax Credit under IRC §41, plus state‑level benefits.
Examples of qualifying activities in tool & die manufacturing
- Die & Tooling Innovations Designing new stamping dies, progressive dies, hybrid dies (additive + subtractive), or smart dies embedded with sensors to monitor wear and process variables.
- Material & Surface Treatment Research Testing new tool‑steel alloys, coatings (PVD, CVD), surface‑engineered tooling that extends life or reduces friction and wear.
- Process Automation & Smart Tooling Integration Embedding sensors in tools for condition‑monitoring, integrating robotic handling of dies, automating tool‑change operations, integrating digital twins of tooling systems.
- Additive Manufacturing & Hybrid Tooling Methods Developing additively‑manufactured tooling inserts, lattice structures in dies, novel cooling channels, and verifying performance via experimentation.
- Wear‑Reduction & Lifecycle Extension Projects Running die‑life trials, evaluating new lubricants/coatings, real‑time monitoring of process variables to reduce downtime and scrap.
What qualifies as R&D in Tool & Die Manufacturing?
To qualify, activities must:
- Pursue a permitted purpose such as designing a new die process, new tooling method, smart die with sensors, or additive manufacturing tool integration
- Address technical uncertainty about method, capability or design in tooling, form‑and‑die engineering, additive manufacturing, or automation
- Follow a process of experimentation through prototype tooling runs, die‑life testing, sensor‑integration trials or process‑validation runs
- Be technological in nature, grounded in mechanical engineering, materials engineering, controls or automation systems
Qualified Research Expenses (QREs)
Roles commonly involved in qualifying activities
- Tool & die engineers and designers
- Materials engineers specializing in tool‑steel, coatings or additive manufacturing
- Automation, robotics and sensor/instrumentation engineers
- Mechanical engineers modelling wear, thermal or structural behaviour
- External labs, testing facilities and prototype tooling houses
What does not qualify
- Routine production of tooling, dies or standard job‑shop tooling without experimentation
- Applying existing tooling methods at scale without innovation
- General administration, sales or standard maintenance tasks
- Tooling or capital‑asset purchases not tied to experimentation
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.
- Project outlines detailing tooling innovation goals, test plans, iterations
- Prototype tooling datasheets, wear‑test logs, sensor‑data runs, die‑performance data
- Comparative metrics (baseline vs improved), revision logs
- Employee time records tied to the experimental work
- Evidence satisfying the four‑part test under §41
Frequently Asked Questions
Yes — if they are designing new tooling, incorporating sensors, automating processes, or materially changing materials/designs rather than simply building standard tools.
Wages of designers and engineers, tooling/material test coupons, simulation software, contract research in labs or prototype facilities.
Tool & die shops, stamping operations, job‑shop toolmakers, additive tooling integrators, and tooling‑equipment manufacturers engaging in innovation.
Routine tooling builds, standard job‑shop operations without experimental change, administrative tasks, and standard equipment purchases.
Savings depend on the scope of R&D; companies can claim a meaningful share of qualified research expenses when properly documented.
Keep logs of prototype tooling builds, wear‑test results, sensor integrations, simulation runs, die‑change logs, and employee time allocations for R&D tasks.
Next Steps
Use our calculator to estimate your potential federal and state benefits
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