How 3-D printing can save on your company’s tax bill
Monday, March 23, 2015
3-D printing, also known as additive manufacturing, is one of the hottest topics in manufacturing today.
After all, this technology is solving many problems, and it could actually be quite cost-effective for some organizations. In some cases, it is possible that additive manufacturing could be used as research and development — this topic is being discussed by many organizations as the possibilities for cutting associated costs are appealing.
Anyone who follows tax law will quickly realize that obtaining the R&D classification quickly makes for some interesting tax ramifications — potentially making additive manufacturing an affordable investment.
First, it is important to note that additive manufacturing is something that can be used and have an impact throughout all stages of the development and production/manufacturing cycle. Therefore, when you are creating with a 3-D printing device, it could be researching for research sake, or it could be researching for specific future development projects.
It is often easier to use additive manufacturing to work through a number of different trial-and-error designs of production. Often, 3-D printing is used to create a model of a product to use for a meeting or demonstration to a potential client.
Experimentation is used throughout this process to refine the design until it is "just right." Unfortunately, sometimes it will take a number of different printing cycles to get the desired results, which can be costly.
Another big cost is the machinery itself. An organization will have to either purchase it, or utilize a 3-D technology firm (called a service bureau) that will allow use of the printers for a cost. For those just dabbling in the technology, utilizing the service bureaus may make sense, but eventually investing in the 3-D printers will be costly.
With these big costs, taking advantage of every tax break possible is important. That is why the research and development credit is so important. With changes to the R&D tax credit in 2014, there are more options than ever before.
However, this is not something that can be obtained lightly. Those organizations that think this could be an option will need to first talk to an accountant about what needs to be done from a financial standpoint.
Once it has been determined that a research and development tax credit is a possibility, the most important thing is to keep perfect records. Log every experiment and record every cost. Labor costs must be accurately recorded, not "guessed at." By doing this, you may be able to qualify for an R&D tax credit at the end of the year.
A credit functions as a reduction of the company's tax liability — usually dollar-for-dollar. The savings on the company's tax bill can be significant and can make a big impact in the cost of utilizing this exciting new technology.
Organizations that are considering the many benefits of 3-D printing should certainly think about the potential research and development tax credits that could be available. After all, these credits could potentially balance out some of the costs of experimenting with this interesting technology and resolve some of your uncertainty (financially at least) about the process.
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