Developers: Say ‘game over’ to overpaying your taxes

Originally posted on April 15, 2013 by Robert Wonish/alliantgroup

Considering the expensive and rapidly rising costs of the software industry, the game development cycle has become increasingly difficult to sustain. Many companies are feeling trapped by rising overhead and have been forced to outsource development to compensate. Luckily, tax incentives are available to software companies that can ensure crucial product developments remain in-house and even be the deciding factor that keeps a company’s doors open.

More often than not, software companies will discover that they qualify for the benefits of tax incentives, such as the R&D tax credit; however, many are simply unaware of its existence or assume that it doesn’t apply to them. If your company has invested time, money, and resources toward the advancement and improvement of designs and processes, then you most likely meet the requirements of the R&D tax credit.

More gaming activities may qualify than you think. In addition to designing and testing new games, software coding, hardware development, and iterative testing can make a company eligible for incentives. A gaming developer of innovative video arcade games had annual sales of $38 million and qualified for $650,000 in state and federal R&D tax credits. During the development process, the company created code for their new products to load into customized arcade devices.

If you are a game developer and the above activities sound in any way similar to what your company does on a day-to-day basis, the R&D tax credit is an available and powerful government endorsed incentive to which you are most likely entitled. If you would like to find out how you also can obtain thousands to millions of dollars in tax credits, read on.

R&D qualifications

The R&D credit is a reward for taxpayers that perform qualified research activities domestically. If you think that you have to have developed groundbreaking software platforms for Fortune 500 software companies to be conducting qualified activities as defined by the Internal Revenue Code, think again.

Game developers simply need to develop new or improved software features or functionality and go through a development process (agile, waterfall, prototyping, spiral, RAD, and so on).

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