The Question

“How do I know when it’s the right time to do an R&D tax credit study?”

Every company hears about the R&D credit eventually. The temptation is to claim it as soon as you can — it’s cash back for work you’re already doing.
But the credit only delivers real value when your business has the right structure, documentation, and timing to make it worthwhile.

So how do you know when that moment has arrived?

The Short Answer

You’re ready for an R&D study when you can confidently answer “yes” to most of the following:

1. You have U.S.-based employees or contractors performing technical work.

2. You’re spending at least $250,000 annually on qualifying R&D payroll or related costs.

3. You can document what your team worked on — design docs, tickets, sprints, commits.

4. You have a defined product or process under development, not just ideation or business planning.

5. You expect to continue similar R&D work in the coming year.

If that describes you, an R&D credit study is no longer an experiment — it’s a strategic decision.

The Deep Dive

1. You Have U.S.-Based Technical Staff or Contractors

The credit only covers work performed in the U.S.
If your engineering team, data scientists, or developers are based domestically — even partly — those wages can qualify.

The turning point often comes when:

• You’ve hired your first few U.S. engineers, or

• You’ve onboarded U.S.-based contractors working under your direction.

That’s the moment when your payroll begins generating credit value.

2. Your R&D Spend Has Crossed the Threshold

While there’s no official minimum, most companies start seeing meaningful ROI once their qualified spend passes about $250,000 per year.

At that level:

• The potential credit (typically 6–10% of qualifying costs) outweighs the cost of a professional study.

• The recurring benefit justifies making R&D documentation part of your operating rhythm.

Below that, you might still qualify — but the ROI may not yet be there.

3. You Can Document the Work as It Happens

The IRS doesn’t expect perfect records, but it does expect contemporaneous evidence that connects technical work to uncertainty and experimentation.

Signs you’re ready:

• Your team already uses Jira, Linear, or similar project tracking tools.

• You can trace who worked on what, and roughly when.

• You have technical artifacts (design docs, architecture diagrams, test results) that show iteration.

If that structure exists, you’re ready for a study — because the story of your R&D is already being captured in real time.

4. You’re Building, Improving, or Scaling — Not Just Planning

If your team is actively designing, testing, or improving a product or process, that’s R&D.
If you’re still in market discovery, design mockups, or business planning, it’s probably too early.

Ask yourself:

• Are we solving technical problems, not just business ones?

• Have we faced uncertainty in how to build, optimize, or automate something?

• Have we tried multiple approaches before finding what worked?

If the answer is yes, that’s the DNA of qualified R&D.

5. You Expect R&D to Continue Year After Year

A one-time study can be valuable, but the biggest gains come from consistency.
When your company invests in ongoing development — product enhancements, platform improvements, performance optimization — the credit compounds over time.

That repeatability also improves documentation, reduces annual effort, and signals credibility with the IRS.

In short: if R&D is part of your company’s DNA, not just a single project, it’s time to start claiming.

6. You Have (or Will Soon Have) Tax Liability to Offset

If you’re pre-profit but have U.S. payroll, the payroll tax offset makes the credit immediately usable.
If you’re profitable, the credit directly reduces income tax liability — and unused credits can carry forward up to 20 years.

If you fall into either camp, the credit is actionable now.
If you’re still pre-revenue with no U.S. payroll, it’s smart to prepare — but too early to claim.

7. You’re Ready to Treat the Credit as a Process, Not a Project

The companies that get the most from the R&D credit don’t treat it as a once-a-year scramble.
They build lightweight habits that make the study simple every year:

• Capture project data quarterly.

• Keep time allocations updated.

• Maintain a clear link between engineering and finance.

When that discipline exists (or you’re ready to build it), your company is ready to make the R&D credit a recurring asset — not a one-time event.

The Takeaway

You don’t need to be huge, profitable, or fully mature to benefit from the R&D credit — you just need enough structure for it to make sense.

You’re ready for an R&D study when:

• You have U.S.-based R&D payroll,

• You can document what your team builds, and

• You’re doing real technical problem-solving — not just business planning.

From there, the credit stops being theoretical and starts being tangible — a measurable way to turn innovation into capital that fuels more innovation.