R&D Tax Credit for Breweries
Running a brewery takes creativity you’re constantly experimenting with new recipes, testing equipment, or refining packaging to perfect taste, consistency, and shelf life. All of this innovation isn’t just part of the job; it may also qualify for a valuable research and development tax credit, helping offset some of your costs.
With big changes in the 2025 tax bill, breweries can now get more immediate relief for money spent on innovation. In this post, we’ll break down what counts as “R&D” for a brewery and how to position yourself to benefit from the Research and development tax credit.
What’s New in 2025?
Until recently, domestic (US) research and experimental costs (the IRS calls them “R&E”) for small businesses had to be capitalized and amortized (expensed) over 5 years for tax purposes. That made cash flow harder for small businesses as the cost of the expense did not align with when it got deducted for tax purposes
We’re happy to report that for small businesses with average gross receipts under $31 million over the past 3 years, this is no longer a limitation. Starting in 2025, you can deduct domestic research costs in the year you incur them, making the Research and development tax credit more accessible and valuable than ever.
For breweries, this means you can claim a tax break immediately instead of waiting years for amortization. If you’ve been investing in recipe development, process improvements, or packaging experiments, the 2025 changes make the Research and development tax credit especially valuable.
What About R&D Costs From Past Years?
If your brewery has been tracking R&D expenses from 2022 – 2024, but didn’t get the full tax benefit yet, there’s some good news.
Under the new rules, you have some options:
- You can go back and amend your business and personal income tax returns for 2022, 2023 and 2024 to deduct your R&D expenses
- Not recommended – Given where we are in the year, we would generally recommend NOT to amend prior years (depending on your specific tax situation), as the processing of amended returns can take anywhere from 6-12 months and will require extra professional fees to accomplish.
- You can write off the remaining balance of all R&D from 2022 through 2024 on your 2025 tax return, or spread it out 50/50 on your 2025 and 2026 tax return.
- This is preferred. Given that the 2025 tax filing season will start in just about 4 months, our general recommendation (depends on your specific tax situation) is to wait and claim the remaining 2022 through 2024 R&D expenses on your 2025 return.
What Counts as R&D in a Brewery
The term “R&D” might make many brewery owners think of labs and scientists, but for the IRS, it simply means you’re working to improve or create something new through a process of experimentation. This qualifies for the Research and development tax credit, even in a brewery setting.
Here are a few everyday brewery activities that often qualify:
- Developing or improving beer recipes: new ingredients, flavor profiles or alcohol levels
- Testing fermentation methods, yeast strains or temperature controls to improve consistency or shelf life
- Trying out new packaging to extend freshness or reduce spoilage
- Installing or modifying equipment to improve efficiency or quality
- Running quality control or pilot batches to test changes
The costs that may qualify for the Research and Development tax credit include wages for employees performing or supervising the work, supplies used in test batches, fees paid to outside labs or consultants, and certain overhead associated with these projects.
For restaurant owners looking to streamline these processes, understanding what are the best AI tools to help run your restaurant more efficiently can complement your R&D efforts by automating tasks, tracking expenses, and improving overall operational efficiency.
How to Show You Qualify
To claim the Research and development tax credit, ensure your activities meet the IRS definition and maintain thorough records to support your claim.
A simple way to think about it is:
- Are you working to eliminate some uncertainty about how to do something?
- Are you using a trial-and-error process?
- Is it technological in nature, meaning is it based on science or engineering?
If the answer is yes, and you’re paying for it yourself, you’re probably on the right track.
Keep documents such as batch logs, recipe versions, test results, invoices, and time sheets for everyone involved. You don’t need fancy software spreadsheets or organized folders of PDFs work fine as long as they support your Research and development tax credit claim.
Smaller breweries can sometimes apply unused Research and development tax credits against payroll taxes instead of income tax, a helpful perk for those still in growth mode. With the 2025 changes, it may also be worth consulting your tax advisor about amending prior returns to capture any missed deductions.
Other Things to Watch Out For
A couple of caveats before you start counting your savings:
- Only domestic research costs get the immediate deduction. Overseas R&D still has to be spread out over 15 years.
- Each state has its own version of R&D credits, and the rules don’t always match the federal ones. It’s worth checking your state’s guidelines too.
- If you’re claiming other credits or incentives, make sure you’re not double-counting the same expenses.
Bringing It All Together
If you’re experimenting with recipes, tweaking processes, or testing equipment, you’re likely already doing R&D even if you don’t call it that. Thanks to the 2025 tax changes, you can now deduct these costs immediately and claim a Research and development tax credit, putting real cash back into your brewery to reinvest.
The next step is to start gathering your records, list past and current projects, and consult your tax advisor about claiming or amending returns. Even small amounts from the Research and development tax credit can add up, and setting up a system now makes the process much easier next year.
At U-Nique Accounting, we help breweries, bars, and restaurants understand these tax breaks and put the right processes in place to capture them.
If you’d like us to help keep more of your hard-earned money in your pocket, reach out and schedule a quick call.
By MATT CIANCIARULO
