Products, prototypes, tooling & process redesign
Estimate your credit →Designing products, building prototypes, and re-engineering production processes routinely require resolving uncertainty about whether a design or process will meet specifications — classic qualified research.
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 |
|---|---|---|
| New product development | New consumer device or industrial component | Will the design meet performance and durability specs? |
| Prototyping & pilot models | Functional prototype or pre-production unit | Does the prototype resolve technical feasibility? |
| Tooling & fixture design | Custom molds, jigs, dies | Will the tooling hold tolerance at production speed? |
| Process / line redesign | Automated assembly line or new process flow | Which process parameters yield quality at scale? |
| Material selection / substitution | Alternative alloy, composite, or polymer | Will the new material meet strength, cost, and regulatory needs? |
| Automation & robotics | Robotic work cell, PLC controls | How to integrate automation reliably into the line? |
| Quality & test method development | New inspection method or test rig | How to detect defects without slowing throughput? |
| Additive manufacturing | 3D-printed end-use parts | Can additive meet structural and surface requirements? |
Engineers compare die geometries and press settings in pilot runs to determine whether a high-strength alloy can meet tolerance without cracking. The documented trials may qualify if they address technical uncertainty.
Scheduled production, routine inspection, and maintenance after a process is selected generally do not qualify. Neither do cosmetic changes without technical experimentation; any customer-funded research needs a separate funding analysis.
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 |
|---|---|---|---|---|
| Designs parts and tests whether they meet real operating requirements. | Direct research | Testing alternative geometries, Resolving strength and tolerance uncertainty +1 more | Drawing known designs, Catalog substitutions +1 more | |
Typically qualifies
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| Finds a workable way to make a new or improved product. | Direct research | Experimental process parameters, Pilot-line development +1 more | Routine production scheduling, Standard line balancing +1 more | |
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| Develops the logic that makes machines work together. | Direct research | Experimental control sequences, Sensor integration alternatives +1 more | Loading standard programs, Routine calibration +1 more | |
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| Tests which material or treatment meets the product's needs. | Direct research | Comparative alloy trials, Heat-treatment experiments +1 more | Routine incoming inspection, Supplier paperwork +1 more | |
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| Builds and measures trial parts for engineering experiments. | Direct support | Fabricating experimental fixtures, Building research prototypes +1 more | Production runs, Routine repairs +1 more | |
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| Runs the trials engineers use to resolve technical questions. | Direct support | Operating experimental test rigs, Gathering trial data +1 more | Routine finished-goods inspection, Shipping checks +1 more | |
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| Directly reviews the team's experimental engineering decisions. | Direct supervision | First-line direction of qualifying trials, Review of technical alternatives +1 more | Hiring, Plant budgets +1 more | |
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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.
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.
Potentially, if you test technical alternatives to resolve uncertainty about an improved process. Routine efficiency changes or installing a known solution are not enough.
Unsuccessful experiments can be relevant when they address a qualifying technical uncertainty. Keep the trial plan, results and associated costs rather than relying only on the final design.
Routine production and quality control generally do not qualify. Separate experimental work from commercial production, even when the same people or machines are involved.
Nondepreciable supplies used in qualified research may be eligible. Equipment purchases and normal production materials are not automatically research supplies.
Generally 65 percent of eligible contract research expenses may count when the relevant requirements are met. Review where the work occurred, who bore the risk, and what research rights you retained.
Keep design revisions, trial-run logs, test results, prototype bills of materials and supported time allocations. Tie each record to a project and the uncertainty being investigated.
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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