How the R & D Credit is Calculated for Most Farm Operations
We work through an example for a row crop farm operation
We have previously posted on how the R&D tax credit under Section 41 can help benefit farmers who perform research activities on their farm.
In this post we will work up an example showing how the credit might be calculated for a row crop farm operation.
In our example, we are assuming that some of the labor, crop inputs and contract expenses (such as for soil testing) qualifies for what is known as qualified research expenses (QRE).
We are assuming that this farm will utilize what is called the alternative simplified credit (ASC) option since that only requires the farm to look back three years to determine their amount of QREs in each of those three years. The regular method involves a lot more calculations and paperwork and for this example we are ignoring it.
Here is a chart showing the various calculations:
