If you’re a freelancer, consultant, or small business owner who builds, designs, codes, or creates good news. The Big Beautiful Bill Act (OBBBA), passed in 2025, introduced major changes to how research and development (R&D) expenses are treated for tax purposes. These updates could mean thousands of dollars back in your pocket, especially if your work involves innovation, experimentation, or custom development.
Whether you’re developing new software, refining internal tools, testing prototypes, or improving client deliverables, the R&D tax credit may apply—even if you’re a solo operator.
What Is the R&D Tax Credit?
The R&D tax credit is a federal incentive designed to reward U.S. businesses that invest in innovation. It’s been around since the 1980s, but the OBBBA has made it significantly more accessible to small businesses and independent professionals.
The IRS continues to enforce detailed requirements for claiming the federal R&D tax credit under Section 41 of the Internal Revenue Code. The credit rewards businesses that invest in qualified research activities (QRAs) and expenses (QREs), but documentation and compliance standards have become more rigorous.
Key Regulatory Highlights for Freelance R & D Tax Credits:
- Qualified Research Activities (QRAs):
Must involve experimentation to eliminate uncertainty, rely on hard sciences (engineering, computer science, biology, etc.), and be intended for use in the U.S. - Qualified Research Expenses (QREs):
Include wages, supplies, contract research (65% creditable), and cloud/software development tied to innovation. - Documentation Requirements:
Businesses must describe the purpose of research, link expenses to specific products or processes, and explain the technological information sought. - Payroll Tax Credit Cap:
Small businesses may apply up to $500,000 of R&D credit against payroll tax liability. - Amended Returns:
Claims must include specific disclosures to be considered valid.
Eligible Activities Include:
- Developing new products, services, or processes
- Improving existing systems or workflows
- Creating custom software, apps, or internal tools
- Experimenting with new techniques, prototypes, or technologies
- Solving technical challenges through trial-and-error
If you’ve spent time or money building something new or improving something existing, you may qualify—even if you’re a team of one.
Do Your Freelance Innovation Activities Qualify? Ask Yourself:
- Did I spend time or money developing or improving something?
- Did I experiment, test, or iterate on a product, service, or process?
- Did I build custom software or tools for my business or clients?
Final Thoughts
The Big Beautiful Bill restores a powerful tax benefit for independent innovators. If you’ve been building, experimenting, or solving technical challenges in your freelance business, don’t assume R&D credits are just for big corporations. You may be eligible—and the impact on your bottom line could be substantial, so be sure to check with a tax professional on your eligibility.
