R&D Tax Credits for Architects: Are You Eligible?

R&D tax credits for architects provide dollar-for-dollar tax savings on qualified research expenses related to design innovation, energy-efficient building solutions, and technical problem-solving—and recent federal law changes in 2025 have made these credits significantly more valuable than ever before.

Key Takeaways:

• The 2023 Harper decision confirmed that architectural designs qualify as business components, opening the door for architects to confidently claim R&D tax credits
• The One Big Beautiful Bill Act of 2025 restored immediate expensing of domestic R&D costs, eliminating the 5-year amortization requirement that had been in place since 2022
• Small architecture firms with less than $5 million in annual gross receipts can offset up to $500,000 per year against payroll taxes, providing immediate cash flow even without tax liability
• Qualifying activities include BIM modeling, energy-efficient design, LEED certification work, and iterative design processes that eliminate technical uncertainty
• Firms can claim credits retroactively for the past three years and carry forward unused credits for up to 20 years

Why Most Architecture Firms Miss Out on Millions in Tax Credits

Here’s something that might surprise you: only 28% of architecture firms claim R&D tax credits, according to an AIA survey. That means more than 7 out of 10 firms are leaving money on the table—sometimes hundreds of thousands of dollars.

The problem isn’t that architects don’t qualify. The problem is that most architects don’t think they qualify. When people hear “research and development,” they picture pharmaceutical labs and Silicon Valley tech companies, not the everyday work happening in design studios across the country.

But here’s the truth: architectural design is research. When you’re figuring out how to meet complex building codes, optimizing energy performance, or solving site-specific structural challenges, you’re doing exactly what the R&D tax credit was created to reward.

I’ve talked to dozens of architecture firms over the years who dismissed the R&D credit because they thought their work was “just normal design.” One firm I know spent two years developing innovative passive cooling systems for affordable housing but never claimed a credit because they didn’t think it counted. When they finally worked with a professional R&D credit specialist, they recovered over $340,000 in credits for work they’d already completed.

The 2025 Tax Law Changes That Make R&D Credits Even Better

If you’ve been putting off looking into R&D credits, 2025 is the year to stop waiting. The One Big Beautiful Bill Act, signed into law in July 2025, made the most significant improvements to R&D tax credits in years.

Before 2025, architects faced a frustrating reality: they had to capitalize and amortize their R&D expenses over five years instead of deducting them immediately. This requirement, which started in 2022, created cash flow problems and complicated tax planning for design firms.

That changed completely in 2025. The new Section 174A allows immediate expensing of domestic R&D costs again, meaning you can deduct qualifying expenses in the same year you incur them. This puts more money back in your pocket when you need it most.

Even better, if you’re a small firm with average annual gross receipts under $31 million, you can go back and amend your 2022-2024 tax returns to claim those expenses you were forced to capitalize. For firms that have been investing heavily in design innovation, this could mean substantial refunds for work you did years ago.

And here’s what really matters: you can now take both the R&D tax credit AND deduct the same qualifying expenses. This dual benefit creates real financial leverage for architecture firms willing to document their innovative work properly.

How the Four-Part Test Actually Works for Architects

Every R&D claim needs to pass what’s called the four-part test under Section 41 of the tax code. This isn’t some impossible hurdle—it’s actually a framework that describes what most architects already do on complex projects.

Part One: Permitted Purpose

Your work needs to aim at creating or improving a business component’s functionality, performance, reliability, or quality. For architects, your business component is the design itself—whether that’s a complete building design, a specific building system, or even a component like an innovative façade solution.

The design doesn’t need to be revolutionary. Small improvements count. If you’re developing a more efficient HVAC layout or finding a better way to meet accessibility requirements, you’ve got a permitted purpose.

Part Two: Technological in Nature

Your work must rely on hard sciences like engineering, physics, or computer science. This is where architects sometimes get confused, but it’s simpler than it sounds. When you’re calculating structural loads, modeling thermal performance, or using BIM software to resolve design conflicts, you’re applying engineering principles. That’s technological.

What doesn’t count? Purely aesthetic choices. If you’re deciding between paint colors or furniture layouts based only on style preference, that’s not technological. But if you’re testing different materials for their thermal mass properties or analyzing daylighting patterns, that’s absolutely technological work.

Part Three: Elimination of Uncertainty

There needs to be genuine uncertainty at the start of your project about how to achieve your goals. This uncertainty could be about capability (can we actually achieve LEED Platinum certification on this budget?), method (what’s the best way to control moisture in this climate?), or design (how do we meet egress requirements with these site constraints?).

Here’s what matters: you didn’t know the answer when you started. If you’re following a standard detail you’ve used a hundred times before, there’s no uncertainty. But if you’re adapting that detail for unique conditions or pushing performance beyond what you’ve done before, uncertainty exists.

Part Four: Process of Experimentation

You need to show that you evaluated alternatives systematically. This doesn’t mean you need a formal lab setup. It means you tried different approaches to solve your problem.

Creating multiple schematic design options? That’s experimentation. Running energy models to compare different building envelope strategies? Experimentation. Using BIM to test different structural systems against cost and performance criteria? Also experimentation.

The key is documentation. You need to show you identified the uncertainty, considered multiple solutions, and evaluated them using a systematic process based on hard science principles.

Four-Part Test Element	What It Means for Architects	Common Example
Permitted Purpose	Creating or improving functionality, performance, or quality of a design	Developing a facade system with 30% better energy performance
Technological in Nature	Work relies on engineering, physics, or computer science principles	Using structural engineering to design for seismic loads
Elimination of Uncertainty	Genuine technical questions exist at project start	Unknown if building can achieve net-zero energy targets within budget
Process of Experimentation	Systematic evaluation of multiple alternatives	Testing three different HVAC configurations through energy modeling

What Architectural Activities Actually Qualify

Let me get specific about what qualifies, because this is where the rubber meets the road. These aren’t theoretical examples—these are activities happening in architecture firms right now that generate real R&D tax credits.

Energy-Efficient Building Design and LEED Certification

When you’re working toward LEED certification or developing energy-efficient designs, you’re often conducting qualifying research. The process of optimizing building performance involves genuine technical uncertainty and systematic experimentation.

Think about a project where you’re trying to achieve LEED Gold certification. You’re not just checking boxes—you’re testing different envelope assemblies, running energy models to compare solar strategies, analyzing daylighting patterns, and making trade-offs between different building systems to hit performance targets.

That’s research. The uncertainty exists because you don’t know at the start which combination of strategies will actually achieve certification within the budget. The experimentation happens through your modeling, testing, and iterative design process.

According to data from R&D tax credit specialists, firms working on energy-efficient projects typically see credit values ranging from 7-10% of their qualified expenses on these projects. For a firm spending $400,000 in wages on LEED and energy-efficient design work, that could mean $28,000-$40,000 in tax credits.

Building Information Modeling and Digital Experimentation

BIM modeling qualifies when you’re using it to solve technical problems, not just produce construction documents. If you’re using BIM to test structural alternatives, resolve complex building system coordination issues, or optimize construction sequences, those activities involve technological uncertainty and systematic experimentation.

A mid-sized architecture firm I worked with used advanced BIM modeling to develop a modular hospital design that could be adapted for different sites. They tested various structural systems, coordinated complex MEP routing through multiple iterations, and used clash detection to refine their solutions. The entire process qualified for R&D credits because they were eliminating uncertainty about how to create a flexible, efficient design system.

Schematic Design and Alternative Concept Development

Your schematic design phase often involves substantial R&D work, especially when you’re dealing with complex requirements or challenging sites. When you develop multiple design concepts and evaluate them against technical performance criteria, you’re conducting research.

This might include testing different building orientations for solar gain, evaluating structural systems for cost and performance, or developing solutions for difficult site constraints like steep slopes or flood zones.

One architecture firm claimed credits for work developing a mixed-use building on a constrained urban site. They created five different massing studies, each with different structural approaches, and used parametric modeling to evaluate them against daylighting, structural efficiency, and constructability criteria. The systematic evaluation of alternatives through technical analysis made this qualifying research activity.

Innovative Material Applications and Building Systems

When you’re testing new materials or developing innovative building systems, you’re squarely in R&D territory. This could mean specifying materials you haven’t used before and testing them for specific performance characteristics, or developing custom building systems that push beyond standard solutions.

Examples include developing a custom curtain wall system with enhanced thermal performance, testing different green roof assemblies for a specific climate, or creating passive ventilation systems that need to meet specific air change requirements.

Key qualifying design activities for R&D credits:

• Developing energy models and testing multiple scenarios to optimize building performance
• Using computational design tools to evaluate structural alternatives systematically
• Creating custom details or assemblies that solve unique technical challenges
• Conducting daylighting analysis and testing different glazing configurations
• Developing water management strategies for challenging sites or climate conditions

The Harper Decision: Why 2023 Changed Everything for Architects

For years, claiming R&D credits as an architect meant fighting an uphill battle. The IRS took the position that architectural designs weren’t “business components” under the tax code. Their argument was simple but wrong: since the code doesn’t specifically list “designs” as a business component, architectural work shouldn’t qualify.

This position ignored decades of precedent and created real problems for architecture firms trying to claim credits for legitimate research work.

Then came Harper v. Commissioner in May 2023. The Tax Court rejected the IRS’s arguments completely. The judge made it clear that designs absolutely qualify as business components—they can be considered processes, techniques, or inventions under the law. The court also affirmed that research happening as part of day-to-day project work can qualify, as long as there’s genuine uncertainty at the start.

This decision didn’t create new rights for architects—it confirmed rights that should have existed all along. But it gave architects the legal backing they needed to claim credits confidently.

Since Harper, we’ve seen other encouraging developments. In December 2024, the Tax Court denied the IRS’s motion for summary judgment in Smith v. Commissioner, a case involving Adrian Smith + Gordon Gill Architecture. This signals that courts are willing to take architect R&D claims seriously when they’re properly documented.

As one tax attorney told the Journal of Accountancy: “Harper and Smith indicate that architects and engineers have a chance to claim the credit if they can build their case with care.” That’s the key phrase—with care. You need proper documentation, clear contract terms, and systematic evidence of your research process.

Contract Terms That Can Make or Break Your R&D Claim

Here’s something most architects don’t realize: your contract language can determine whether you qualify for R&D credits. The tax code specifically excludes “funded research,” which means research paid for by someone else where you don’t bear the financial risk.

This creates a potential problem for architects working under client contracts. If your contract structure makes it look like the client is funding the research and taking all the rights to the results, the IRS could argue your work is funded research that doesn’t qualify.

What Makes a Contract R&D-Friendly

Your contracts need to show that you’re bearing real financial risk and retaining rights to reuse your design innovations. This doesn’t mean you can’t work for clients—it means your contract terms need to reflect reality about how architectural services work.

Fixed-fee contracts typically work better than time-and-materials contracts for R&D credits. With a fixed fee, you’re bearing the risk that the design work might take longer or cost more than expected. If the research activities fail or take extra time, you don’t get paid more—that’s risk.

Contingency-based contract provisions can help. If payment depends on successfully delivering a design that meets specific performance requirements, you’re clearly bearing risk. The client can’t get their money back if you tried hard but couldn’t solve the technical challenges.

You also need to retain the right to use your design innovations in other projects. This doesn’t mean you’re giving away your client’s specific building design. It means you can use the technical solutions, details, and methodologies you developed in future work.

One firm I worked with updated their standard contract to include language clarifying that while the client owns the specific design for their project, the firm retains the right to use the design approaches, technical solutions, and methodologies in other work. This simple contract change protected hundreds of thousands in potential R&D credits.

Contract Feature	R&D-Friendly Approach	Problematic Approach
Fee Structure	Fixed fee or not-to-exceed amount (firm bears cost risk)	Pure cost-plus reimbursement (client bears all cost risk)
Rights to Work Product	Firm retains right to reuse technical solutions and methodologies	Client owns all rights, firm cannot reuse any approaches
Performance Requirements	Payment contingent on meeting specific technical performance goals	Client pays regardless of whether technical goals are achieved
Project Scope	Clear identification of uncertain technical challenges to be solved	Work described only as “routine architectural services”

What Expenses Qualify as Qualified Research Expenses

Once you’ve identified qualifying activities, you need to calculate your Qualified Research Expenses (QREs). This is where the actual credit amount comes from, and it’s worth understanding what counts.

Employee Wages

The biggest bucket of QREs for most architecture firms is employee wages. You can claim wages for employees who are performing, supervising, or directly supporting qualified research activities.

This includes your design architects, project architects, technical staff, and BIM specialists working on qualifying projects. If someone spends 80% or more of their time on qualified research, you can include their full wages. If they spend less than 80% of their time on R&D, you need to allocate their wages based on actual time spent.

One thing that surprises people: project managers and senior staff who supervise R&D work can have their wages included too, as long as they’re directly supervising the research activities.

Supplies and Materials

Supplies used and consumed in the research process qualify. For architects, this is usually a smaller category than wages, but it can include materials used for physical models, prototypes, or testing.

What doesn’t qualify: office supplies, rent, utilities, and other general overhead. The supplies need to be directly consumed in the research activities.

Contract Research Expenses

If you hire outside consultants or contractors to perform qualifying research, you can claim 65% of what you pay them. This could include structural engineers, MEP consultants, energy modelers, or specialty consultants who help solve technical challenges.

The key requirement: the contractor needs to be performing qualified research, not just providing general services. And your contract with them needs to show that you’re bearing the financial risk and retaining rights to the research results.

Cloud Computing and Software Costs

Costs for cloud-based computing used in qualified research can qualify. This might include cloud computing costs for running energy models, structural analysis software subscriptions, or BIM server costs directly tied to research activities.

What you can’t include: software used for routine design work, general office software, or anything not directly tied to eliminating technical uncertainty.

As a practical matter, most architecture firms see credit values between 6-10% of their QREs. A firm with $1 million in qualifying wages might see federal credits between $60,000-$100,000, plus potential state credits.

The Payroll Tax Offset: A Game-Changer for Small Firms

If you’re running a small or startup architecture firm, the payroll tax offset might be the most valuable part of the R&D credit. This provision, created through the PATH Act of 2015, lets qualified small businesses apply their R&D credit against payroll taxes instead of income taxes.

Why does this matter? Because many small firms don’t have enough income tax liability to use the R&D credit. You might be profitable on paper but paying minimal federal income tax after other deductions. In the past, that meant the R&D credit didn’t help you much.

The payroll tax offset changed that completely. If you meet the requirements, you can offset up to $500,000 per year against your employer-side payroll taxes. That’s the 6.2% Social Security tax and 1.45% Medicare tax you pay on employee wages—real money that comes out of your bank account every pay period.

Qualifying as a Small Business

To use the payroll tax offset, you need to be a “qualified small business.” That means:

• Less than $5 million in gross receipts for the current tax year
• No gross receipts for any tax year before the five-year period ending with the current year (basically, you’re five years old or younger)

If you meet these requirements, you can elect to apply your R&D credit against payroll taxes when you file your tax return. The election needs to be made on a timely filed return, including extensions.

For many startup architecture firms, this creates immediate cash flow improvement. Instead of carrying forward a credit you can’t use because you don’t have income tax liability, you’re reducing your quarterly payroll tax deposits starting in the quarter after you file your return.

A startup firm I worked with had $180,000 in qualifying R&D expenses in their third year of operation. They generated about $14,000 in federal R&D credits. Because they were a pass-through entity with minimal income tax liability after other deductions, that credit wouldn’t have helped them much. But by electing the payroll tax offset, they reduced their quarterly payroll tax deposits by $3,500 for the next year. That’s real money improving cash flow at a critical growth stage.

State R&D Tax Credits: Doubling Your Benefit

The federal R&D credit gets most of the attention, but don’t sleep on state credits. Over 40 states offer their own R&D tax credit programs, and these can significantly increase your total benefit.

State credits vary widely in structure and value. Some states offer credits as a percentage of federal QREs, while others have their own calculation methods. Some are refundable (meaning you get money back even if you don’t owe state tax), while others are non-refundable and can only offset state tax liability.

The state where your research activities occur determines which state credit you can claim. If you have offices or projects in multiple states, you might be able to claim credits in multiple states based on where the qualifying work happens.

For example, California offers a credit of 15% of QREs over a base amount, with special provisions for small businesses. New York has a refundable credit for small businesses and startups. States like Massachusetts and Connecticut have their own robust R&D credit programs specifically designed to encourage innovation.

The key point: combining federal and state credits can increase your total benefit to 15-20% or more of your QREs, depending on where you operate. That’s substantial money for firms doing innovative work.

Documentation: What You Need to Prove Your Claim

Here’s where many architecture firms stumble: documentation. The IRS requires “sufficient documentation” to support your R&D claim, and they’ve gotten more specific about what that means in recent years.

Starting with Memorandum 20214101F in 2021, the IRS clarified minimum documentation requirements. For each project claiming credits, you need to identify:

• All business components (projects or project components) for which you’re claiming credits
• All research activities performed for each business component
• The individuals who performed each research activity
• The information each person sought to discover
• Total qualified expenses, broken down by category

This isn’t as scary as it sounds if you have good project management practices. Most architecture firms already track time by project and task. The key is making sure your time tracking system captures enough detail to show that activities were qualifying research.

Design Files and Process Documentation

Your design files are some of your best documentation. Keep versions showing your design evolution—schematic options, alternatives you considered, iterations you went through. This shows the process of experimentation.

BIM models are particularly valuable because they often show your coordination process, clash detection, and resolution of conflicts. If you used BIM to test different systems or evaluate alternatives, those files document your experimentation.

Energy models, daylighting studies, structural analyses, and other technical studies are gold for R&D documentation. They show you were using hard science to evaluate alternatives and eliminate uncertainty.

Project Communication

Save your emails, meeting notes, and internal communications about technical challenges and solutions. These often capture the uncertainty you faced and how you approached solving problems.

Design review notes, building department comments, and responses to RFIs can show the technical challenges you had to overcome. They’re evidence that uncertainty existed and you had to figure things out.

Contracts and Fee Agreements

Keep your client contracts, consultant agreements, and proposals. These establish that you bore financial risk and retained rights to reuse your technical innovations.

Time Tracking Records

Detailed time records showing who worked on what activities are essential. Your time tracking doesn’t need to say “R&D” on every entry, but it needs to be specific enough to show what people were actually doing.

Instead of time entries that just say “design work,” use entries like “developed and compared three structural alternatives for Tower A,” “ran energy models for envelope options,” or “coordinated MEP systems in BIM to resolve conflicts.”

The more specific your time tracking, the easier it is to defend your claim if the IRS comes asking questions.

Working with a Professional R&D Tax Credit Consultant

I’m going to be direct here: claiming R&D credits properly is complicated, and trying to do it yourself can cost you money in two ways. First, you’ll likely miss eligible expenses and claim less than you could. Second, improper documentation or calculation methods can put your entire claim at risk if the IRS audits you.

The IRS is paying close attention to R&D credits right now, especially for architects and engineers. Recent court cases show they’re willing to challenge claims they think are weak. The stakes are high enough that you need expertise on your side.

A professional R&D credit consultant who specializes in architecture and engineering firms brings several advantages:

They understand the nuances of the four-part test as it applies to architectural work. They know which activities qualify and how to document them properly. They’ve seen what works in audits and what doesn’t.

They can review your contracts and identify potential issues before they become problems. They can suggest contract language that protects your ability to claim credits while still meeting your clients’ needs.

They have systems for calculating credits accurately using either the regular research credit method or the alternative simplified credit method, whichever produces better results for your situation.

Many R&D credit firms work on a contingency basis, meaning they only get paid if you get credits. This aligns their incentives with yours and removes the upfront cost barrier.

Most importantly, if the IRS questions your claim, you’ll have professionals who can defend it. They can provide technical documentation, respond to IRS inquiries, and if necessary, work with your tax attorney to defend the claim through the appeals process or in court.

The right R&D credit consultant becomes a long-term partner, helping you identify qualifying activities prospectively, improve your documentation processes, and maximize your credits year after year. For firms doing substantial innovative work, this relationship typically pays for itself many times over.

Take Action: Getting Started with Your R&D Credit Claim

If you’ve read this far, you probably realize your firm has been leaving money on the table. Here’s how to start fixing that:

First, review your projects from the last three years. Look for work that involved technical uncertainty, systematic testing of alternatives, and hard science principles. Don’t just think about your most innovative projects—many “routine” projects contain qualifying activities if you look at them through the R&D lens.

Second, review your standard contracts. Do they protect your ability to claim R&D credits? If not, work with your attorney to update them. This doesn’t mean overhauling your entire practice—often small language changes make the difference.

Third, improve your documentation practices going forward. Make sure your time tracking captures specific technical activities, not just generic “design” entries. Save your design alternatives, technical analyses, and process documentation in an organized way.

Fourth, talk to your CPA and consider bringing in an R&D credit specialist. Your regular CPA probably isn’t an expert in R&D credits for architects specifically. You need someone who understands the technical issues and recent case law.

Finally, if you’re a small firm under $5 million in annual revenue, look into the payroll tax offset. This could put real money in your pocket even if you’re not profitable enough to benefit from the regular income tax credit.

The architecture profession is facing real financial pressures—rising costs, fee compression, talent shortages. The R&D tax credit is one of the few tools available that can improve your bottom line directly. With the 2025 law changes making credits even more valuable, there’s never been a better time to claim what you’ve earned.

R&D Tax Credits for Architects FAQs

Citations

• American Institute of Architects. How firms can reduce tax burdens through credits and incentives. AIA, July 2025.
• Morgan Lewis. New Section 174A Restores Domestic R&E Deductibility, but Other Changes Bring Mixed Results. Morgan Lewis, July 2025.
• Engineered Tax Services. What’s in the One Big Beautiful Bill & What it Means for You. Engineered Tax Services, July 2025.
• Albin, Randall and Bennett. New R&D Expensing Rules Under the One Big Beautiful Bill. ARB, July 2025.
• Baker Newman Noyes. One Big Beautiful Bill Act: Section 174 Research Costs Overhauled. Baker Newman Noyes, July 2025.
• alliantgroup. The One Big Beautiful Bill Act of 2025. alliantgroup, September 2025.
• Internal Revenue Service. Audit techniques guide: Credit for Increasing Research Activities. IRS.
• Alternate Tax Solutions. Tax Court Clears Path for Architects to Claim R&D Credits. Alternate Tax Solutions, December 2023.