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R&D Tax Credit for Life Sciences / Biotech

Drug discovery, diagnostics, assays, devices; formulation testing, lab automation, validation protocols.

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How the R&D credit applies to Life Sciences / Biotech

Life sciences work sits squarely in the credit's wheelhouse: drug discovery, diagnostic development, assay design, and medical-device engineering are inherently experimental. Formulation testing, validation protocol development, and lab-automation engineering also qualify.

Because clinical and pre-clinical work spans long timelines, careful business-component definition and time tracking matter — each program or assay is typically its own component.

Work that often qualifies in Life Sciences / Biotech

Typical qualifying roles

Research Scientist Bioinformatics Scientist Process Development Scientist R&D Associate Assay Development Scientist Regulatory/Validation Engineer Lab Director

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$650,000
Supplies$120,000
Cloud & computer rental$25,000
Contractor research spend$200,000
↳ 65% statutory haircut (IRC §41(b)(3))$130,000
Total QRE$925,000
Illustrative first-year ASC credit (6%) ≈ $55,500

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 Life Sciences / Biotech

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

Permitted purpose

The activity aims at developing a new diagnostic assay.

Technological in nature

The work relies on biology, chemistry, and biochemistry.

Elimination of uncertainty

Unknown whether an assay will achieve target sensitivity/specificity.

Process of experimentation

Teams use iterative formulation and validation testing.

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