When I have a beer at a brewery, I often find myself wondering about the costs that go into producing it, and whether those expenses qualify for the research and development (R&D) tax credit.
Okay, that’s mostly a lie. These days, I’m lucky to get a sip or two in before I’m wrangling my 15‑month‑old son, making sure he doesn’t disrupt patrons or wander behind the bar like he owns the place.
But parenting chaos aside, the R&D tax credit really is a big deal for breweries, distilleries, and wineries. It rewards businesses for creating new products, and both the IRS and the State of Minnesota offer credits. Combined, they typically amount to a roughly 13% credit on expenses related to developing new products.
Those qualifying expenses fall into three categories:
- Wages
- Supplies & ingredients
- Contractor services
If you’re not claiming the R&D credit yet, now is a fantastic time to start, and I’m always happy to answer questions.
A Quick Detour Through the Weird Years (2022–2024)
Between 2022 and 2024, the R&D tax credit became a surprisingly controversial topic. For reasons too painful to fully unpack here, federal law required R&D expenses to be capitalized rather than deducted immediately.
For the non-accounting folks: capitalization means you had to amortize R&D expenses over five years instead of deducting them in the year you spent the money.
So yes, you could still take the credit tied to those costs. But you couldn’t deduct the expenses right away. If you’re thinking, “That doesn’t make any sense,” well…you’re not wrong. Why was it structured that way? The answer, my friend, is blowin’ in the wind.
Enter: The Big Beautiful Bill
Thankfully, lawmakers came to their senses. The recently passed Big Beautiful Bill now allows businesses to:
- Claim the R&D tax credit, and
- Deduct R&D expenses in the same year
Just like the good old days.
Even better, the bill also gives businesses several options for dealing with the R&D expenses that were previously required to be amortized. You can choose to:
- Deduct all unamortized R&D expenses in 2025
- Deduct half in 2025 and the other half in 2026
- Amend your 2022–2024 tax returns
- Continue amortizing the expenses
In most cases, we expect options #1 and #2 to provide the best outcome. Amending returns can make financial sense in some situations, but it means paying a CPA to revise both the business and individual returns, and then waiting (very patiently) for the IRS to process a refund. Current delays often stretch to 18 months or more.
Have Questions? I’d Love to Help.
If you’re curious about the R&D tax credit, wondering whether your product development qualifies, or deciding which option under the Big Beautiful Bill makes the most sense, I’m always happy to talk through it.
Reach out anytime, I genuinely love helping with this stuff. Contact us at info@myboyum.com.