Airframe, propulsion, avionics, and systems development demand resolving severe technical uncertainty under stringent safety, weight, and environmental constraints.
The credit is calculated on qualified research expenses (QREs) — primarily wages for engineers and technical staff who spend time on qualifying activities, plus supplies, cloud/compute, and 65% of qualified contract research.
The table below lists the business components that most often qualify, a common example, and the technical uncertainty that makes each one defensible.
| Business component | Example | Technical uncertainty |
|---|---|---|
| Airframe & structures | New airframe or composite structure | Will it meet load, weight, and fatigue requirements? |
| Propulsion systems | Engine, thruster, or propulsion module | Will it meet thrust, efficiency, and thermal targets? |
| Avionics & flight systems | Flight control or navigation system | Will the system meet safety and reliability standards? |
| Materials & coatings | High-temperature alloy, composite, coating | Will the material survive the operating environment? |
| Guidance & control software | GNC algorithms and flight software | Which algorithm meets accuracy and stability needs? |
| Systems integration & test | Integration and environmental testing | Can subsystems integrate and perform reliably? |
| UAS & autonomous systems | Drone platform or autonomy stack | Can it operate safely and reliably? |
| Manufacturing & process | New aerospace manufacturing process | Will the process meet spec and certification? |
Potentially qualifying: Engineers test alternative composite layups and revise prototypes to resolve an unknown weight-versus-fatigue tradeoff, if they bear the research risk and retain substantial rights under the contract.
Generally not qualifying: Routine acceptance inspections or production rework after the design is fixed are not experimentation. Research may also be excluded as funded when payment is not contingent on success or the customer receives substantial rights; review the contract terms and work separately.
Find your own job titles below. Each row shows the wage category a role usually falls under and the kinds of work that typically do and do not count. Titles alone never make wages eligible; the activity must meet the four-part test.
7 of 7 roles shown
| Role | What they do | Wage category | Typically qualifies | Typically does not |
|---|---|---|---|---|
| Develops and tests designs against flight and mission requirements. | Direct research | Experimental aerodynamic configurations, Uncertain flight-system alternatives +1 more | Routine analysis of known designs, Contract administration +1 more | |
Typically qualifies
Typically does not
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| Develops how a vehicle knows where it is and controls its movement. | Direct research | Experimental control algorithms, Uncertain sensor-fusion methods +1 more | Known configuration changes, Routine monitoring +1 more | |
Typically qualifies
Typically does not
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| Tests materials and structures under demanding operating conditions. | Direct research | Experimental composite layups, Uncertain thermal-protection methods +1 more | Routine incoming inspection, Established production testing +1 more | |
Typically qualifies
Typically does not
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| Develops hardware and software that must meet demanding timing and reliability needs. | Direct research | Uncertain avionics architecture, Experimental real-time processing +1 more | Routine firmware loading, Known component replacement +1 more | |
Typically qualifies
Typically does not
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| Tests whether interacting subsystems can meet technical requirements. | Direct research | Experimental integration alternatives, Resolving subsystem incompatibilities +1 more | Routine requirements administration, Schedule coordination +1 more | |
Typically qualifies
Typically does not
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| Prepares and measures tests used by the research team. | Direct support | Instrumenting qualifying test articles, Recording experimental measurements +1 more | Routine inspection, Operational servicing +1 more | |
Typically qualifies
Typically does not
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| Directly supervises the engineers resolving technical uncertainty. | Direct supervision | First-line supervision of qualifying experiments, Technical review of alternatives +1 more | Government relations, General program management +1 more | |
Typically qualifies
Typically does not
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Wage categories follow IRC Section 41. Only the portion of time spent on qualified research counts, and the percentage must be documented.
Funded-research risk is high in defense contracting. Cost-plus or fully funded contracts where the customer bears the risk and holds the rights are typically excluded. Confirm contract structure before claiming.
Illustrative example using sample figures. Your actual credit depends on your facts; see Form 6765 and consult a tax professional.
The IRS requires qualifying research to satisfy four tests. Here's how they typically map for this industry:
The activity aims at improving a product, process, software, or technique used in the business — not just a business outcome.
The work relies on principles of engineering, computer science, biology, chemistry, or another hard science to resolve uncertainty.
There was genuine uncertainty at the outset about whether — or how — the component could be built or improved.
The team evaluated alternatives: A/B tests, prototypes, benchmarks, simulations, or iterative design-build-test cycles.
Take these into a 15-minute conversation with your team.
The last question matters most. Customer-funded work and work performed outside the US are generally excluded. Funded work is excluded to the extent your business does not bear the financial risk or does not retain substantial rights in the results.
Possibly, but funded-research rules require careful contract review. The allocation of financial risk and substantial rights in the research matters, not merely who the customer is.
Reimbursement arrangements often create funded-research concerns. Review the actual terms and facts rather than assuming all development under a contract qualifies.
No. Fixed pricing may be relevant to economic risk, but retained rights and the research requirements must also be considered. Keep the contract and evidence of the work performed.
They may count when used to resolve technical uncertainty by comparing alternatives. Routine verification of a proven design or operational acceptance testing is different.
Experimental development undertaken to resolve technical uncertainties may be relevant. Administrative certification work and routine compliance checks are not automatically qualified research.
Keep design trade studies, simulation results, test plans, prototype revisions and time-allocation support. Retain contract terms and performance-location records for the funding and U.S.-research analysis.
Most companies underestimate what they can claim. Our study covers every qualifying role, every component, and every year still open for amendment.
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