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R&D Tax Credit for Aerospace / Defense

Airframe, propulsion & avionics development; materials and structural testing; simulation & qualification.

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How the R&D credit applies to Aerospace / Defense

Aerospace and defense programs are heavily R&D-intensive: airframe, propulsion, and avionics development, advanced materials and structural testing, and simulation and qualification work.

Note that funded research (e.g., certain government contracts where the payer retains rights and risk) may be excluded — business-component analysis and contract review are especially important here.

Work that often qualifies in Aerospace / Defense

Typical qualifying roles

Aerospace Engineer Mechanical Engineer Avionics/Embedded Engineer Materials Engineer Structural Test Engineer Systems Engineer R&D Engineer

Wages for time these roles spend on qualified research may count toward your credit.

Example credit scenario

Illustrative first-year ASC calculation

Qualified W-2 wages$700,000
Supplies$150,000
Cloud & computer rental$40,000
Contractor research spend$100,000
↳ 65% statutory haircut (IRC §41(b)(3))$65,000
Total QRE$955,000
Illustrative first-year ASC credit (6%) ≈ $57,300

Note: Review for funded-research exclusions (e.g., government contracts where the payer retains rights and risk) before relying on this figure.

Illustrative example using sample figures. Your actual credit depends on your facts; see Form 6765 and consult a tax professional.

The four-part test — applied to Aerospace / Defense

The IRS requires qualifying research to satisfy four tests. Here's how each typically maps in this industry:

Permitted purpose

The activity aims at improving airframe strength-to-weight or propulsion efficiency.

Technological in nature

The work relies on aerospace and materials engineering.

Elimination of uncertainty

Unknown whether a design will pass structural/qualification testing.

Process of experimentation

Teams use simulation, prototype builds, and qualification test campaigns.

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