Is ISO Certification Tax Deductible?
Yes, ISO certification is tax-deductible.
A company is free to choose whether they get ISO certified, so you might expect to bear the cost of certification yourself. This was what the US government held believed for a long time.
Initially, ISO certifications were considered tax-deductible because the license is an “ordinary and necessary business expense under section 162 of the code.”, but that has changed to Code 41. If you are interested to learn how to qualify for R&D Tax credit keep reading.
ISO certification is tax-deductible and may qualify you for more tax benefits.
Your ISO certification is tax-deductible, and so are the quality improvements you make.
With changes in regulations, R&D tax credits were introduced.
(1) Qualified Research according to IRS code 41 is “The term “qualified research expenses” means the sum of the following amounts which are paid or incurred by the taxpayer during the taxable year in carrying on any trade or business of the taxpayer—
(A) in-house research expenses, and
(2) In-house research expenses
(A) In general
The term “in-house research expenses” means—
(i) any wages paid or incurred to an employee for qualified services performed by such employee,
(ii) any amount paid or incurred for supplies used in the conduct of qualified research, and
(iii) under regulations prescribed by the Secretary, any amount paid or incurred to another person for the right to use computers in the conduct of qualified research.
B) contract research expenses.
Per the definition above Qualifying R&D falls under the following categories:
- new product development,
- significant product improvement,
- new process development, and
- significant process improvement.
An example of the industry activity that will qualify for purpose of the R&D tax credit is Research and process development for ISO or other industry or regulatory certifications.
To qualify, you need to be able to answer yes to these questions:
- Are you improving and developing components of the business?
- Are you getting rid of technical uncertainty?
- Are you comparing different ways to solve problems in your business?
- Are you experimenting and relying on hard science like computer science to make decisions?
The tax code is complicated but with a professional, you’ll be able to capture all the hidden benefits that iso certification has to offer.
Tell Management ISO Certification is Tax-Deductible
Whether or not ISO certification is tax-deductible is important to you as a quality management professional because you need to get management on board. One of the biggest fears that they have is that expenses are too high. Bring these tax incentives to their attention to get them on board. Without their buy-in, you’re going to struggle to succeed.