Life Sciences

Life Sciences Companies: Unlock $150k - $800k in R&D Tax Credits

From drug development to medical devices to diagnostics—your innovation qualifies

Most Activities Before Regulatory Approval Qualify

In the life sciences world, the general rule of thumb is: Most activities before regulatory approval or commercialization are R&D activities. Whether you're developing drugs, devices, or diagnostics—it's all qualifying research.

Nearly 100% of your activities qualify if you're engaged in the following:

Qualifying Activities by Track

  • •Target identification and validation
  • •Lead compound discovery & optimization
  • •Formulation development
  • •Toxicology and safety studies
  • •Phase 1 & Phase 2 clinical trials
  • •Analytical method development
  • •Manufacturing process development (pre-commercial)

Common Qualifying Activities

Therapeutics

  • ✓
    IND Application Preparation
    Scientific research and testing for FDA submissions
  • ✓
    Clinical Trial Protocol Development
    Design and statistical analysis planning
  • ✓
    CMC Development
    Chemistry, Manufacturing, and Controls documentation
  • ✓
    Bioanalytical Method Development
    Assay development and validation
  • ✓
    Manufacturing Process Development
    Scale-up and optimization studies

Medical Devices

  • ✓
    Design Controls & V&V
    Verification and validation testing
  • ✓
    Biocompatibility Testing
    Material testing and safety validation
  • ✓
    Sterilization Validation
    Process development and validation
  • ✓
    Software Development (SaMD)
    Software as a Medical Device development
  • ✓
    Clinical Studies (510(k)/PMA)
    Clinical evidence generation

Diagnostics

  • ✓
    Assay Development
    Design and optimization of diagnostic tests
  • ✓
    Clinical Validation
    Studies to establish clinical performance
  • ✓
    Algorithm Development
    Computational and AI-based diagnostics
  • ✓
    CLIA Certification
    Laboratory validation activities
  • ✓
    Quality Control Development
    QC procedures and testing methods

Calculate Your Life Sciences R&D Tax Credits

Get an instant estimate of your federal and state R&D tax credits

Most life sciences activities before regulatory approval = ~100% qualify for R&D credits • Average credit rate: $0.11 per $1 of R&D spend • Works for therapeutics, devices, diagnostics, and research tools

💡 Companies with <$5M revenue can offset payroll taxes immediately (up to $250K/year). Companies with ≥$5M can only use credits against income taxes.

Include all research and development costs

W-2 wages for scientists, engineers, lab staff, clinical teams

Include CROs, testing labs, contract manufacturers, clinical sites. Only US-based contractors qualify. The IRS allows 65% of contract research payments to be claimed (you receive the standard ~10% credit rate on that 65%).

How is the credit calculated on CRO costs?

Contract Research Calculation:

  • • You pay CRO: $100,000
  • • IRS allows: $65,000 of that to qualify (65%)
  • • Credit rate: ~10% of the $65,000 = $6,500 credit

Net effect: ~6.5% credit rate on total CRO costs (compared to ~10% on direct wages)

Consumables used in R&D

Materials, biocompatibility testing, sterilization validation, V&V testing (65% eligible)

For Software as a Medical Device (SaMD), diagnostic algorithms, or data platforms (80% eligible)

Important Notes

Activities after regulatory approval become more commercialization-focused and may not fully qualify. But everything leading up to that point is typically claimable.

Offshore Work: Even if you use overseas contractors or CROs, you may still qualify if you're paying a US-based entity that subcontracts the work. The key is the payment goes to a US bank account associated with a US entity.