Custom AI development may qualify for federal R&D tax credits, CPA explains
Only_Lobster_4126 · reddit · 2026-08-09
A CPA who also runs an AI automation company explains that custom AI development for clients may qualify for federal R&D tax credits, yet most agencies never discuss this.
Key points:
- Buying AI or deploying chatbots doesn't create credits, but building custom pipelines, retrieval architectures, validation layers, eval harnesses, etc., may meet the four-part test.
- Credit ownership is determined by contract: if client pays regardless of success and owns everything, they may claim (often 65% of qualifying invoices); if your fee is contingent and you retain reuse rights, you may claim.
- Evidence must exist during development: eval datasets, failed approaches, architecture decisions, tickets, time allocation.
- Qualified expenses yield roughly 6-10% federal credit; three developers on experimental builds for a year can generate tens of thousands in recurring credits. Young companies can offset payroll taxes (cash) but must file timely.
- Section 174 amortization pain is gone; domestic R&D is immediately deductible for tax years after 2024.
- Not all AI work qualifies; routine implementation doesn't, and false claims lead to audits.
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