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Federal GovCon R&D Tax Credit Pre-Screen

Government contractors often leave significant tax credits unclaimed. Our free pre-screening assessment helps you determine if your federal IT work qualifies for R&D tax credits under IRC Section 41.

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What Is the R&D Tax Credit — for Government Contractors?

The federal Research and Development (R&D) tax credit under IRC Section 41 rewards companies that invest in developing new or improved products, processes, software, or technologies. For government contractors, this can include work performed under federal contracts involving custom software development, systems integration, cybersecurity solutions, and more.

Many GovCon firms assume their contract work doesn't qualify because it's "funded research." However, a significant portion of contract activities may still qualify, particularly when the contractor bears financial risk, uses firm-fixed-price (FFP) contracts, or develops internal tools and processes.

The credit can be worth 6-8% of qualifying R&D expenditures, potentially representing hundreds of thousands of dollars in tax savings annually for mid-size contractors.

Key Benefits

  • Dollar-for-dollar reduction in federal tax liability
  • Credits can be carried forward up to 20 years
  • Applicable to both federal and state tax returns
  • Qualifying small businesses can offset payroll taxes
  • Retroactive claims possible for up to 3 prior tax years

Who Qualifies?

The four-part test determines eligibility: permitted purpose, technological uncertainty, process of experimentation, and technological in nature.

Likely Qualifies

  • Custom software development under FFP contracts
  • Systems integration and architecture design
  • Cybersecurity tool development and testing
  • Cloud migration engineering and DevSecOps pipelines
  • Data analytics and machine learning model development
  • Internal R&D tools and bid/proposal technical work
  • Prototyping and proof-of-concept development

Likely Does Not Qualify

  • Routine IT maintenance and help desk support
  • Staff augmentation with no technical direction
  • Pure cost-plus contracts where government funds all R&D
  • Configuration of commercial off-the-shelf (COTS) products
  • Project management and administrative tasks
  • Market research and business development

Free R&D Tax Credit Pre-Screener

Answer a few questions about your government contracting work to get an instant preliminary assessment of your R&D tax credit eligibility.

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R&D Tax Credit FAQ

Yes, many types of government contract work can qualify. The key factor is the "funded research" exclusion under IRC Section 41(d)(4)(H). Work performed under firm-fixed-price (FFP) contracts generally qualifies because the contractor bears the financial risk. Cost-reimbursable contracts may partially qualify depending on the contract structure and who retains rights to the research results.
The funded research exclusion says that research does not qualify for the credit if the taxpayer is paid for the research regardless of its outcome. Under FFP contracts, the contractor bears financial risk and is not guaranteed payment for all costs, so this work is generally not "funded research." Cost-plus contracts, where the government reimburses all costs, are more likely to be excluded. However, even under cost-type contracts, the contractor's internal R&D and IR&D expenses may still qualify.
Firm-fixed-price (FFP) contracts are the strongest candidates because the contractor bears the economic risk. Time-and-materials (T&M) contracts can also qualify depending on the structure. Cost-plus-fixed-fee (CPFF) and cost-plus-incentive-fee (CPIF) contracts are more challenging but may partially qualify, especially for work where the contractor retains intellectual property rights. Internal R&D and IR&D/B&P costs are also strong candidates regardless of contract type.
Strong documentation includes project descriptions showing technological uncertainty, employee time tracking records, contract documents (especially contract type and SOW), technical specifications and design documents, testing and iteration records, payroll records for qualifying employees, and supply costs. The IRS expects contemporaneous documentation, so maintaining records as projects progress is essential.

Don't Leave Money on the Table

Many GovCon firms qualify for significant R&D tax credits but never claim them. Let Tribute help you identify and capture these savings.

Talk to an R&D Tax Credit Specialist

Disclaimer: The information provided on this page and through the R&D Tax Credit Pre-Screener is for general informational purposes only and does not constitute tax, legal, or accounting advice. The pre-screening results are preliminary and do not guarantee qualification for R&D tax credits. Actual eligibility depends on specific facts and circumstances that must be evaluated by a qualified tax professional. Tribute is not a CPA firm or law firm and does not provide tax return preparation services. We recommend consulting with a licensed tax advisor or CPA experienced in R&D tax credits before claiming any credits. IRC Section 41 and related Treasury Regulations govern R&D tax credit eligibility. Tax laws are subject to change.

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