--- title: End-of-Year R&D Tax Credit Calculator for Manufacturers description: There is a formula that manufacturers can use to calculate end-of-year R&D tax credit which, in itself, may appear a bit complicated. It has to do with the nine steps of the manufacturing process, the percentage of time individuals spend on each step, and their salary. image: https://www.blacklinegrp.com/hubfs/AdobeStock_114397096.jpeg --- [![BLG Logo New](https://www.blacklinegrp.com/hubfs/New%20Logos/BLG%20Logo%20New.svg "BLG Logo New")](https://www.blacklinegrp.com/)   Questions? **[Call 763-746-1291](tel:17637461291)** - Services - [R&D Tax Credit](https://www.blacklinegrp.com/the-rd-tax-credit-black-line-group) - [How We Help Your Business](https://www.blacklinegrp.com/how-we-help) - [The BLG Way](https://www.blacklinegrp.com/the-blg-way) - [FAQs](https://www.blacklinegrp.com/faqs) - [Who We Help - CPA & Businesses](https://www.blacklinegrp.com/who-we-help) - [Industries We Serve](https://www.blacklinegrp.com/industry-brochures) - [Case Studies](https://www.blacklinegrp.com/case-studies) - [Employee Retention Credit "ERC"](https://www.blacklinegrp.com/employee-retention-credit) - [Cost Segregation](https://www.blacklinegrp.com/cost-segregation) - [Sales and Use Tax](https://www.blacklinegrp.com/sales-and-use-tax) - [About Us](https://www.blacklinegrp.com/about-us-black-line-group) - [Blog](https://www.blacklinegrp.com/blog) - [Contact](https://www.blacklinegrp.com/contact-us) [![GET STARTED ❯](https://no-cache.hubspot.com/cta/default/4260083/72b155c4-e6f5-4b0d-af1b-94df969aacfc.png)](https://cta-redirect.hubspot.com/cta/redirect/4260083/72b155c4-e6f5-4b0d-af1b-94df969aacfc) - Share - - - - - [mailto:?body=https://www.blacklinegrp.com/blog/rd-tax-credit-calculator](mailto:?body=https://www.blacklinegrp.com/blog/rd-tax-credit-calculator) # End-of-Year R&D Tax Credit Calculator for Manufacturers [Black Line Group Team](https://www.blacklinegrp.com/blog/author/black-line-group-team) Dec 27, 2018 - Share: - - - - - - [mailto:?body=https://www.blacklinegrp.com/blog/rd-tax-credit-calculator](mailto:?body=https://www.blacklinegrp.com/blog/rd-tax-credit-calculator) [![R&D tax credit calculator](https://www.blacklinegrp.com/hs-fs/hubfs/AdobeStock_114397096.jpeg?width=300&name=AdobeStock_114397096.jpeg)Now that you know you can qualify for the R&D tax credit](https://www.blacklinegrp.com/blog/research-and-development-tax-credit), the next step is to figure out how much you can recover. Keep in mind that working with a professional tax adviser throughout this complex process is the best way to ensure a thorough and accurate claim is prepared for filing. In the meantime, you can soothe your curiosity and get a general idea of how much credit you may be qualified to receive. There is a formula that manufacturers can use to calculate end-of-year R&D tax credit which, in itself, may appear a bit complicated. It has to do with the nine steps of the manufacturing process, the percentage of time individuals spend on each step, and their salary. ## **The Manufacturing Process** Before you plug numbers into an equation, it's important to understand the [nine steps of the manufacturing process](https://www.blacklinegrp.com/blog/research-and-development-tax-credit). Time spent on activities in these areas could qualify as allowable research activities, so it’s important to document meetings and discussions (in-person and remote), discussion topics, and participants throughout the life of the project. Only those activities that meet the [Four-Part Test](https://www.blacklinegrp.com/blog/four-part-test) will qualify for the research credit. ### **Sales Time** Time you spend on these activities [during the sales process](https://www.blacklinegrp.com/blog/sales-activities-rd-tax-credit) could qualify for the research credit: - Understanding the project’s general requirements - Evaluating technical specifications - Approving technical specifications - Quoting the price of the project ### **Design Meetings** During [design meetings with a current or prospective customer,](https://www.blacklinegrp.com/blog/how-your-design-meetings-may-qualify-for-rd-tax-credits) time spent discussing form, fit and function (FFF) can qualify for R&D tax credit. ### **Flat Blank Layouts** The time spent figuring out the most efficient and cost-effective way to utilize raw materials including experimenting with the materials and evaluating alternatives is eligible for R&D tax credit. [Learn more about how the process for flat blank layouts can qualify for the R&D tax credit.](https://www.blacklinegrp.com/blog/flat-blank-layouts-rd-tax-credit) ### **Tool Making** [Tool design, tool building,](https://www.blacklinegrp.com/blog/tool-design-rd-tax-credit) and portions of the trial phase may qualify for the research credit. ### **Engineering Process** New equipment acquisition and initiatives to [optimize the manufacturing process](https://www.blacklinegrp.com/blog/manufacturing-process-optimization) are candidates for the research credit. ### **Proof of Concept** Time spent [building a sample or prototype](https://www.blacklinegrp.com/blog/proof-of-concept) for the customer can qualify for the research credit, although not all activities qualify. ### **Trial Production Run** Measuring the first pass yield rate and making adjustments in the production process to improve the yield rate during a [trial run can qualify for R&D tax credit](https://www.blacklinegrp.com/blog/trial-production-run). ### **Quality Approval** [Documentation of the production part approval process](https://www.blacklinegrp.com/blog/custom-manufacturing-quality-approval-processes) (PPAP) and the initial sample inspection report (ISIR) is essential to qualifying for the research credit. ### **Packaging** Developing or [improving product packaging](https://www.blacklinegrp.com/blog/packaging-process) can be considered for the research credit depending on what was done in terms of cost, quality or reliability. ## **The Basic Formula** To calculate the qualified research expense: (Percent of time employees spend on the manufacturing process) X (Their salary) = Dollar amount that qualifies for the R&D tax credit from employees' salary In most cases, 7% of your employees' total salary will qualify for the tax credit. This does not include money you can receive for supplies and contractor research that qualify for the R&D tax credit. Remember, this formula is for general estimation only. [Your tax professional is the best source of advice and information](https://www.blacklinegrp.com/blog/selecting-an-rd-tax-partner) on the exact amount you’ll receive for the research credit. 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