--- title: How Software Project Planning Can Qualify for the R&D Tax Credit description: Throughout each of the seven main phases of software development that generally occur, you’ll likely find activities that qualify for the R&D Tax Credit. Feasibility analysis is the first stage and it's no exception. image: https://www.blacklinegrp.com/hubfs/AdobeStock_210409153.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/software-project-planning](mailto:?body=https://www.blacklinegrp.com/blog/software-project-planning) # How Software Project Planning Can Qualify for the R&D Tax Credit [Black Line Group Team](https://www.blacklinegrp.com/blog/author/black-line-group-team) May 2, 2019 - Share: - - - - - - [mailto:?body=https://www.blacklinegrp.com/blog/software-project-planning](mailto:?body=https://www.blacklinegrp.com/blog/software-project-planning) ![software feasibility analysis](https://www.blacklinegrp.com/hs-fs/hubfs/AdobeStock_210409153.jpeg?width=300&name=AdobeStock_210409153.jpeg) Planning for potential software projects can be complex and time-consuming, but it’s a critical first phase in the software development life cycle for commercial software vendors.  Fortunately, the time spent on many of these activities could reduce your company's tax liability through the R&D Tax Credit. Qualified research expenses provide a great opportunity for software companies to recoup some of the costs associated with this initial planning phase as well as subsequent phases of the software development life cycle. As a commercial software vendor, if you are developing or have recently developed new or enhanced software, there are bound to be activities that qualify for the R&D Tax Credit.  One of our previous blog posts [highlighted all seven phases of the software development lifecycle](https://www.blacklinegrp.com/blog/r%26d-tax-credit-for-new-software). ## Planning The first phase of the software development life cycle typically begins by defining the business problem and/or goal and determining potential solutions.  This phase concludes by estimating the market opportunity and return on investment. Each of the activities throughout this phase should be run through the Four-Part Test (below) to identify activities with qualified research expenses. Typical questions to be answered in this planning phase include: - What is the business problem to be solved? - What approach should we take to solve the business problem? - What are the primary capabilities, functions and features? - What benefits will the users receive? - What resources are required? - What are the costs? - How much time will it take? - What does the competitive landscape look like? - Does this give us a unique competitive advantage? - Will this help prevent competitors from entering the market? - What’s the size of the market? - What’s the estimated return on investment? ## The Four-Part Test To determine which activities and their associated expenses may qualify for the credit, run them through the [Software Industry’s Four-Part Test.](https://www.blacklinegrp.com/blog/four-part-test-software-industry) The four parts of the test are: - **Permitted Purpose.** This is the activity intended to make or improve either a product or process that results in improved function, performance, reliability, quality or cost efficiency. - **Technical Uncertainty.** This is the activity intended to eliminate technical uncertainty when developing or improving a product or process related to methodology, design, techniques, formulas or inventions. - **Process of Experimentation.** This is the activity that includes a process of experimentation to eliminate or resolve technical uncertainty. During the process, various alternatives and approaches are evaluated by modeling, simulation, trial and error, prototyping and other methods. - **Technological in Nature.** The process of experimentation must rely on the hard sciences (engineering, physics, biology, chemistry, computer science). The R&D tax credit was created to encourage the development of new and/or improved products or processes, including software. Always [consult with an R&D Tax Credit expert](https://www.blacklinegrp.com/assessment) with deep software expertise for a complete understanding of how this credit can reduce your tax liability. If you are interested in pursuing the R&D Tax Credit for your software business, [contact Black Line Group](https://www.blacklinegrp.com/contact-us) to discuss your planning phase and we can jointly determine how various activities pass the Four-Part Test. 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