AI and the R&D tax credit

Jul 07, 2024

Kristin Kautz, CPSM


Can AI consulting and development be used for state and federal R&D tax credits?

At this point, I sound like a broken record, “Get started today using AI!” It’s not too late, I promise. AI is a marathon, so lace up your trainers, cross the starting line, and get in the race. Every step you take – small shuffles or big, long strides – will give you and your firm a competitive advantage next week, next month, and next year. And the ROI of current AI technology is not just qualitative. It can be quantified too – give me a shout, and I’ll talk you through my equation of expenditures and time savings. Right now, for every $3.62 I spend on AI, I get back one hour of time.

I recently found out it can also be a boost to your business bottom line!

Listening to Jordan Wilson of Corporate Tax Advisors, Inc. at Zweig Group’s AI & AEC Tech Summit, I learned something interesting that might incentivize AEC firms even further to kickstart their AI journey.

An added benefit and by-product of developing your own software and/or AI products is a state and federal R&D tax credit.

Based on our agreement when you hire us for AI consulting, the qualified expenses in developing new AI code and/or products belong to you based on rights and risk rules. By engaging with us, the expenses associated with development are eligible as QREs and create a tax incentive for your company. In effect, this reduces the overall cost of the project. This can be accomplished because:

  • Qualification is defined as the design and development of new AI code and/or software.
  • A contractor is defined as having a contract for engagement, with an hourly rate, and the rights are owned by the client.
  • Qualified expenses are defined as 65 percent of W2 and contractor spend related to the development of new AI code and/or products.
  • The R&D tax credit is equal to 8 percent of the qualified expenses.

As an example, if a firm spent $100,000 with a contractor to develop new AI code and/or products, the qualified expense would be $65,000. Applying 8 percent of that for the tax credit equals $5,200.

If you want to know more, reach out directly to Jordan for information on the R&D tax credit and to me for AI engagement and developer recommendations. We are both here to help you get the most value and return from creating and implementing AI in your business.

You can also learn more at Zweig Group’s upcoming Minds & Machines event in Chicago. Whether you’re just beginning your AI journey or seeking to expand your existing AI initiatives, this symposium equips attendees with the knowledge and understanding needed to chart decisive next steps and navigate the ever-evolving landscape of AI implementation. Learn more here! 

Kristin Kautz, CPSM is Zweig Group’s artificial intelligence (AI) consultant and trainer. Learn more about Kristin here.

Minds & Machines Zweig Group’s T(AI)SK FORCE will be hosting a deep dive into AI integration and operations. This training provides a high-impact, hands-on learning experience that is designed to help emerging and current leaders be at the forefront of the AI technological revolution. Join us July 30-31 in Chicago, Illinois. Click here to learn more!

About Zweig Group

Zweig Group, three times on the Inc. 500/5000 list, is the industry leader and premiere authority in AEC firm management and marketing, the go-to source for data and research, and the leading provider of customized learning and training. Zweig Group exists to help AEC firms succeed in a complicated and challenging marketplace through services that include: Mergers & Acquisitions, Strategic Planning, Valuation, Executive Search, Board of Director Services, Ownership Transition, Marketing & Branding, and Business Development Training. The firm has offices in Dallas and Fayetteville, Arkansas.