The R&D credit is one of the most overlooked opportunities afforded to U.S. dental practices, with the vast majority of eligible dentists (and, in many instances, their CPA's) self-censoring away from the credit.
While many associate the research and development (R&D) tax credit with the technology, aerospace/defense and pharmaceutical industries, the dental industry is often overlooked as an area for potential R&D credits. While identifying and documenting qualified research activities and expenditures taking place in dental practices is generally more difficult than in traditional R&D-intensive industries, it can be well worth the effort for dentists that perform certain types of activities. Because not all activities qualify, it is important to understand the R&D credit qualification criteria sufficiently to determine whether your dental practice has enough potential R&D activity to warrant further investigation.
Many dental practices, oral surgeons and dental labs perform qualified research as part of their project activities. Qualified research is most often found in activities that present one or more technical challenges that must be overcome. The dental practices that provide the best credit opportunity are the ones that perform new and improved procedures, as well as using new, improved or upgraded equipment or technology.
If you think you have to be operating in a laboratory to qualify for R&D tax credits as defined by the Internal Revenue Code, think again. If you are in the dental industry, there is a strong chance that you could benefit from an R&D Tax Credit study.