Pick the page written in your vocabulary
Each page maps your everyday work to the statute, shows where the expenses usually sit, and names the exclusion most likely to apply to you.
SaaS & Software
Everyday engineering, misread as “just building the product”
New architectures, novel algorithms, AI/ML systems, performance and scale work. Customer-facing SaaS generally escapes the internal-use software threshold - the question is whether you were resolving technical uncertainty.
- QREs that carry it
- Engineering wages, then cloud and compute rented for development, test, and training runs.
- Most often missed
- Cloud spend left out of the QRE base
Technology & Hardware
Iterate, measure, iterate - the credit was written for this
Prototyping, firmware, PCB and signal integrity, thermal and mechanical design, materials, and design-stage test. Failed prototypes count: the test is the process, not the outcome.
- QREs that carry it
- Engineering wages, plus real supply spend - the materials and components consumed proving out a build.
- Most often missed
- SBIR/STTR and customer-funded development never screened
Manufacturing
The process is a business component too
Process development, tooling and fixtures, automation integration, scrap and yield engineering, first-article and pilot runs. Improving how you make a part qualifies even when the part never changes.
- QREs that carry it
- Technical wages, plus materials and scrap consumed in development trials and pilot runs.
- Most often missed
- Customer-funded NRE and tooling claimed without reading the PO
Pharmaceutical & Biotech
High-value claims that have to survive an exam
Discovery, assay and analytical method development, formulation, preclinical work, bioprocess development and scale-up. Life-sciences claims draw scrutiny, so substantiation is the whole game.
- QREs that carry it
- Scientist and technician wages and U.S. contract research (CRO work, included at 65%), plus reagents and consumables.
- Most often missed
- Grant- and partner-funded work not screened under §41(d)(4)(H)
The rules that do not change with your industry
Six things every study has to get right, whether the business component is a bioreactor protocol or a query planner.
The unit is the business component
The four-part test runs against each product, process, computer software, technique, formula, or invention - not against your R&D budget, your cost centers, or your epics (§41(d)(2)(B)). One weak component does not sink the strong ones.
Process counts as much as product
“Process” is in the statutory list. A manufacturing process, a purification step, or a build-and-deploy pipeline you never sell is as eligible a business component as the thing it produces.
Uncertainty is about capability, method, or design
You qualify when the information available to you does not establish whether you can do it, how to do it, or what the right design is. It does not have to be new to the world - only unresolved for you.
Failure is still qualified research
The credit rewards a systematic process of evaluating alternatives. Prototypes that failed, models that underperformed, and approaches you abandoned are part of the claim, not evidence against it.
Only U.S.-performed research counts
Research conducted outside the United States is excluded (§41(d)(4)(F)) - regardless of who employs the engineers or where the invoice is paid. Offshore development is the most common silent overstatement we see.
Who paid, and who bore the risk, decides
Research funded by another party is generally excluded (§41(d)(4)(H)). The analysis is contractual: whether payment was contingent on success and whether you retained substantial rights in the results.
Each of these is worked through in detail in the four-part test guide, and the money side is in qualified research expenses. How the credit is computed - regular method, ASC, and the §280C election - is in calculation methods.
Which QRE categories dominate, by industry
The four statutory expense categories are the same everywhere. Their relative weight is not - and the category a company forgets is usually the one its industry treats as ordinary overhead.
| Industry | Wages§41(b)(2)(A)-(B) | Supplies§41(b)(2)(C) | Contract research§41(b)(3) - 65% | Computer rental§41(b)(2)(A)(iii) |
|---|---|---|---|---|
| SaaS & Software Wages dominate; rented cloud and compute is the category most often left out. | Usually the largest block | Situational | Often material | Often material |
| Technology & Hardware Prototype materials and components consumed in test are real money here. | Usually the largest block | Often material | Often material | Situational |
| Manufacturing Trial-run materials and development scrap sit alongside shop-floor engineering time. | Usually the largest block | Often material | Situational | Situational |
| Pharmaceutical & Biotech U.S. CRO work - included at 65% - can rival internal payroll. | Usually the largest block | Often material | Usually the largest block | Situational |
Illustrative. A directional shape based on how each industry spends and what the statute allows - not a survey, a benchmark, or a promise about your facts. Contract research enters the base at 65% of the amount paid under §41(b)(3) (higher percentages apply to certain consortium and energy research payments), and only U.S.-performed research is eligible.
Your industry is not on this list. Do you still qualify?
Probably - and the reason is structural. §41 never mentions an industry. It asks whether a business component was being developed or improved, whether the work relied on the physical, biological, or engineering sciences or computer science, whether real technical uncertainty existed, and whether you resolved it by evaluating alternatives. Aerospace suppliers, engineering and architecture firms, food and beverage formulators, agtech, tool-and-die shops, and game studios all clear that framing routinely.
These four pages exist because they are the four where we have written the evidence patterns down in full - not because they are the four the statute allows. If you build, formulate, engineer, or otherwise resolve technical problems for a living, the honest next step is a conversation about your facts rather than a search for your logo on a page.
Two more things that travel with every industry: most states with a corporate income or franchise tax run their own R&D credit off a similar research base, and §174A restored immediate expensing of domestic R&E for tax years beginning after December 31, 2024. A study that only chases the federal credit leaves both on the table.