Building Innovation: Navigating the Terrain of R&D Tax Credits for Real Estate Developers

Although it might not be obvious, the R&D tax credit can benefit taxpayers in a wide variety of industries including the real estate industry.

The name of the credit suggests that it is reserved for taxpayers that are developing new, cutting-edge technologies. However, many business activities related to real estate development may qualify for the R&D tax credit: 

• Evaluating a property and its location to determine whether it is a suitable site to construct a commercial, residential or mixed-use building
• Developing the design for a new building or the renovation of an existing building, including building facades and floor plans, to achieve functional requirements and/or meet historic preservation requirements
• Designing a park or greenspace
• Evaluating different building materials to improve designs or meet project requirements for energy efficiency, sustainability or adherence to building regulations
• Design and development to achieve Leadership in Energy and Environmental Design (LEED) or energy efficient requirements

Real estate developers may also have R&D qualifying activities related to software development. For example, a residential developer may invest in a custom software solution or application to allow potential tenants to take a virtual tour, view the various units and layouts available, or submit a lease application. Once a tenant signs a lease, they might use custom software to pay their rent, reserve amenities, or unlock their apartment. Similarly, home builders may create a software platform for customers to shop for and purchase a new home or to select custom design options, including paint colors, flooring, fixtures or layouts, and then even view a virtual rendering of their custom design. 

Many of the business activities and expenses associated with the design of a new or renovated building and the development of related software solutions are eligible for the R&D credit. If these examples sound applicable to your business, contact a member of the Schneider Downs Credits and Incentives Team to discuss how the R&D Tax Credit can potentially reduce your company’s tax liability. 

About Schneider Downs Real Estate Services 

The Schneider Downs Real Estate industry group provides accounting, tax and consulting services to clients nationally and internationally. Our real estate group meets our clients’ needs by providing value-added solutions in all areas of real estate ownership, including commercial, industrial, residential, multi-family, student housing, hotel and land development.  

To learn more, visit our Real Estate Industry Group page.