Published on October 25, 2023
Unlocking Tax Credits for Your 3D Printer
If you own or are considering purchasing a 3D printer for your business, here’s some exciting news: your 3D printer purchases can most likely qualify for valuable R&D (Research and Development) tax credits. This applies to both federal and state tax credits, and there’s also the Section 179 deduction, which we’ll delve into shortly.
Believe it or not, many companies currently using 3D printing technology are not taking full advantage of these financial opportunities. In fact, a Wall Street Journal estimate suggests that only a mere five percent of companies eligible for R&D tax credits are actually leveraging them.
The R&D tax credit is specifically available for activities related to the development of new and improved products and processes. If you’ve adopted 3D printing in your business, whether it’s for research and development, prototyping, or production, you’re likely eligible for these tax credits.
According to a survey by Sculpteo, the primary use of 3D printers in most companies is for proof of concept and prototyping. Furthermore, 80% of enterprises utilize 3D printing to accelerate innovation, and 51% are actively using it in their production processes.
The R&D Tax Credit: What You Need to Know
The R&D tax credit, enacted in 1981, provides a tax credit of up to 13 percent of eligible expenses related to new and improved products, processes, or software projects. To qualify, these activities must be of a technological nature and involve the elimination of uncertainty in certain processes.
This includes using 3D printing services like the one offered here at Vision Miner to test and experiment with new concepts. Eligible costs comprise employee wages, supplies, testing costs, contract research expenses, and expenditures linked to patent development.
Starting in 2016, the R&D tax credit became permanent, and its benefits expanded. Businesses can now use this credit to offset the Alternative Minimum Tax, and startups can apply the credit against payroll taxes, up to $250,000 annually.
Section 179: Deducting Your 3D Printer Costs
Section 179 of the IRS tax code allows businesses to deduct the entire purchase price of qualifying equipment, including 3D printers, purchased or financed during the tax year. This means you can deduct the full cost from your gross income in the year you acquire the equipment.
While Section 179 previously earned nicknames like the “SUV tax loophole” due to businesses using it to write off vehicle purchases, the tax benefit has changed. However, it still offers valuable advantages. There are caps on the total amount you can write off, with limits set at $1.04 million for 2020. The total equipment purchase cap is $2.59 million for 2020. The deduction phases out on a dollar-by-dollar basis after reaching these limits, disappearing entirely after $3.63 million.
Section 179 is a valuable deduction for both small and medium-sized businesses, making it relevant for companies with annual revenues under $50 million.
How 3D Printers Qualify for Tax Credits
3D printers find themselves in various roles that qualify for these tax benefits. Here are a few ways your 3D printer may make your business eligible for R&D tax credits and Section 179 deductions:
- Manufacturing: 3D printing can revolutionize traditional production processes, including end-use parts, tooling, and jigs and fixtures.
- Software: Employing advanced scanning or CAD design programs for 3D printing qualifies for credits. This includes software purchase costs and wages for employees using the software.
- Medical Industry: In the medical field, 3D printing is used for developing prosthetic limbs, ears, organs, and more. The development of tools, surgical guides, implants, and models falls within this category.
- Materials Development: The costs of materials consumed during R&D activities are eligible expenses. 3D printing materials, such as plastics, metals, resins, ceramics, and more, are all considered qualified research expenses.
- Software Development: Activities like experimental coding for new or improved software projects are eligible for tax credits.
The potential for financial benefits when you integrate 3D printing into your business is substantial. Whether you’re researching new concepts, designing prototypes, developing software, or advancing manufacturing processes, you may be eligible for significant tax deductions or credits at the end of the year.
Maximizing Tax Savings with 3D Printing
If you’re not already utilizing 3D printing for your business, it’s a compelling time to start. There are numerous ways to leverage this technology and maximize your tax benefits. Regardless of the specific applications, adopting 3D printing can potentially save your business a substantial amount of money.
At Vision Miner, we specialize in high-performance 3D printing, especially with materials like PEEK, ULTEM, PPSU, and more. If you’re interested in exploring high-performance 3D printing for your business, feel free to reach out to us. We can assist you in making the right choices for your unique application, even if it goes beyond the materials we currently offer.
Final Thoughts
The convergence of 3D printing technology and tax benefits like R&D credits and Section 179 deductions is an opportunity not to be missed. By embracing innovation and integrating 3D printing into your business operations, you can unlock significant financial advantages while staying at the forefront of technological advancements. Don’t hesitate to explore how 3D printing can transform your business and help you save money.