Landscape Design Companies
The R&D Tax Credit Explained
The R&D Tax Credit is a federal incentive designed to reward businesses for innovation and technical problem-solving. While many landscape design firms overlook it, the credit applies when you engage in developing new designs, solving site-specific challenges, or experimenting with sustainable methods.
Landscape design involves a surprising amount of technical complexity—soil composition, drainage issues, structural integrity, plant compatibility, and climate responsiveness—making many of your activities qualifying R&D under the IRS’s four-part test.
QUALIFYING ACTIVITIES
To qualify, the activity must involve:
- A permitted purpose (new/improved product or process),
- Eliminate uncertainty,
- Be technological in nature (biology, engineering, environmental science), and
- Involve a process of experimentation.
Common Qualifying Activities:
- Designing Custom Irrigation Systems
- Tailored to site topography, soil types, or water usage targets
- Tailored to site topography, soil types, or water usage targets
- Innovating with New Plant Combinations or Eco-friendly Materials
- Testing for climate resilience, maintenance needs, aesthetics
- Testing for climate resilience, maintenance needs, aesthetics
- Stormwater Management Design
- Developing solutions for runoff, erosion control, permeable paving
- Developing solutions for runoff, erosion control, permeable paving
- Green Roof or Living Wall Development
- Testing substrate, drainage, and plant viability on vertical or roof surfaces
- Testing substrate, drainage, and plant viability on vertical or roof surfaces
- Sustainable Landscape Systems
- Solar lighting integration, graywater use, native plant systems
- Solar lighting integration, graywater use, native plant systems
- Site-Specific Structural Elements
- Retaining walls, grading strategies, or hardscapes requiring engineering input
- Retaining walls, grading strategies, or hardscapes requiring engineering input
- Design-to-Install Testing
- Troubleshooting on-site integration of design features
- Troubleshooting on-site integration of design features
- CAD/BIM Software Development or Customization
Creating or enhancing modeling tools or automated design processes
WHAT cAN BE CLAIMED
You can claim Qualified Research Expenses (QREs) in these areas:
- Wages: Salaries of employees directly or indirectly involved in R&D (e.g., landscape architects, CAD designers, civil engineers, horticulturalists)
- Supplies: Non-depreciable materials used in testing (e.g., prototype materials, plants used in test beds)
- Contract Research: Fees paid to consultants, engineers, or labs assisting with experimentation
Cloud Computing Costs: Platforms or software used for rendering, modeling, or analytics related to R&D
WHAT DOESN'T QUALIFY
- Routine landscape maintenance
- Basic re-use of standard templates or design patterns
- Sales, marketing, or purely artistic design
- Installation work that doesn’t require technical adaptation
- Purchasing or installing off-the-shelf systems without modification
- Non-U.S. based design or testing work
HOW THE CREDIt WORKS
Your qualified expenses (QREs) generate a tax credit that can:
- Offset federal income tax liability
- Offset payroll taxes (for eligible small businesses under $5M in gross receipts, and within 5 years of generating revenue)
Unused credit can be carried forward up to 20 years and back 1 year if needed.
Average R&D Tax Credit for Landscape Design Firms
The amount varies based on firm size, project complexity, and how well R&D is documented.
Company Size | Average Annual Credit |
Small Local Design Studio | $10,000 – $30,000 |
Mid-Sized Design-Build Firm | $30,000 – $100,000 |
Large Firm with Civil Engineering | $100,000 – $500,000+ |
For Small to Mid-Sized Landscape Design Companies
Smaller firms often qualify if they:
- Regularly prototype or customize site plans
- Adapt to unique client properties (slopes, water features, regulations)
- Work with new materials or native plant research
- Have in-house designers who experiment with CAD/BIM tools
Payroll tax offset is often the most accessible benefit, especially for younger firms.
Tips:
- Track revisions to plans and reasoning behind them
- Document site testing, pilot projects, or experimental builds
- Tag employees’ time spent on problem-solving or design iterations
For Larger Firms or Multi-Location Operations
Firms with civil engineering, architecture, or sustainability departments may qualify for much larger credits.
These firms often:
- Lead green infrastructure or LEED-compliant projects
- Use advanced modeling or environmental simulation tools
- Perform soil testing, stormwater modeling, or structural landscape integration
- Develop internal design software or customization tools
They should maintain thorough documentation to defend their R&D claims—technical drawings, test results, meeting notes, and prototypes.
