Can a business use both R&D Tax Credits and Cost Segregation?

A business may be able to use both if it has qualified research activity and qualifying commercial property. Each strategy requires separate analysis, documentation, and support based on the company’s facts.

When should a company review both strategies?

A company should review both when it invests in commercial property while also performing technical development, testing, software development, product improvement, process improvement, formulation work, or engineering activities.

Are R&D credits and cost segregation related?

They are separate tax strategies, but both may be relevant during business growth. R&D credits focus on qualified research activity, while Cost Segregation focuses on commercial property depreciation classification.

Does a facility expansion create R&D credit eligibility?

A facility expansion does not automatically create R&D credit eligibility. However, technical work performed in connection with new products, processes, testing, automation, or engineering improvements may need review.

Does R&D activity make a business eligible for cost segregation?

R&D activity alone does not create cost segregation eligibility. Cost Segregation depends on commercial property facts, construction details, acquisition records, renovations, or improvements.

Can Ohio plastics manufacturers claim R&D credits?

Ohio plastics manufacturers may need to review R&D credit eligibility when projects involve polymer testing, injection molding improvements, extrusion trials, material substitution, mold changes, or technical problem-solving supported by documentation.

R&D Tax Credit Cost Segregation Strategy Guide

A business may need to review both R&D Tax Credits and Cost Segregation when it is investing in technical development and commercial property. An R&D tax credit cost segregation strategy can help owners, CFOs, and CPAs evaluate separate tax opportunities tied to qualified research activity and property depreciation.

Since 2004, RCG has completed more than 25,000 R&D tax credit studies and identified over $750 million in tax savings. RCG’s team includes CPAs, tax specialists, engineers, technical writers, and architects who support R&D Tax Credit and Cost Segregation studies with audit-ready documentation.

RCG provides R&D Tax Credit and Cost Segregation support for businesses across Ohio, including manufacturers, property owners, engineering firms, food processors, plastics companies, software companies, and industrial operators in Columbus, Cleveland, Cincinnati, Akron, Dayton, Toledo, Canton, Dublin, Mason, and surrounding business communities.

R&D Tax Credits and Cost Segregation apply to different business activities. The R&D Tax Credit focuses on qualified research activity, such as product development, process improvement, software development, testing, prototyping, formula work, or engineering-based problem-solving.

Cost Segregation focuses on commercial property. A study may help identify building components that can be classified into shorter depreciation categories when supported by engineering-based analysis.

A business may need both reviews when it is growing through facility investment and technical development at the same time.

Business Situation	Strategy to Review
Developing new products while expanding a facility	R&D Tax Credit and Cost Segregation
Improving manufacturing processes in a renovated plant	R&D Tax Credit and Cost Segregation
Purchasing a commercial building for technical operations	Cost Segregation, with R&D review if qualified activities occur
Testing new formulas in upgraded production space	R&D Tax Credit and Cost Segregation
Building out specialized lab, production, or engineering space	Cost Segregation, with R&D review for technical activity

Even when both opportunities apply, they should not be treated as the same tax benefit. R&D credits are tied to qualified research activity and related expenses. Cost Segregation is tied to property components and depreciation timing.

Combining them in one strategy does not mean merging the rules. Each review requires its own documentation, analysis, and support. For R&D credits, the focus is technical uncertainty, experimentation, business components, and qualified research expenses. For Cost Segregation, the focus is property facts, construction details, asset classifications, and depreciation treatment.

This distinction helps businesses avoid overgeneralized claims and supports a more defensible review.

Plastics manufacturers may need R&D credit review when projects involve developing a new component, improving a polymer blend, testing recycled or alternative materials, reducing defects, improving cycle time, scaling production, or improving product durability.

A company may also test changes in mold temperature, injection pressure, cooling time, gate location, material composition, or machine settings to resolve part quality or dimensional issues. Polymer engineers may evaluate whether a product can meet strength, flexibility, chemical resistance, weight, heat, or performance requirements.

These activities may support a review when they involve technical uncertainty and documented testing. Eligibility is not based on whether the project is labeled innovative. The analysis should focus on the technical problem, alternatives evaluated, and records available.

A coordinated review requires clear records for both strategies. R&D documentation may include engineering notes, prototype records, test results, CAD revisions, process logs, quality reports, project timelines, employee time records, and technical meeting notes.

Cost Segregation documentation may include construction drawings, invoices, contractor records, purchase documents, depreciation schedules, renovation records, site information, and asset descriptions.

Organized documentation helps align the technical and property facts without confusing the two tax treatments.

An engineering-based review is important because both strategies involve technical details. R&D Tax Credit studies may require understanding product development, manufacturing processes, software, testing, engineering, or technical uncertainty. Cost Segregation studies may require understanding building systems, site improvements, specialty components, and construction records.

For owners, CFOs, and CPAs, this type of review can provide a clearer picture of what may qualify, what needs to be separated, and what documentation is available.

Can a business use both R&D Tax Credits and Cost Segregation?
A business may be able to use both if it has qualified research activity and qualifying commercial property. Each strategy requires separate analysis, documentation, and support based on the company’s facts.
When should a company review both strategies?
A company should review both when it invests in commercial property while also performing technical development, testing, software development, product improvement, process improvement, formulation work, or engineering activities.
Are R&D credits and cost segregation related?
They are separate tax strategies, but both may be relevant during business growth. R&D credits focus on qualified research activity, while Cost Segregation focuses on commercial property depreciation classification.
Does a facility expansion create R&D credit eligibility?
A facility expansion does not automatically create R&D credit eligibility. However, technical work performed in connection with new products, processes, testing, automation, or engineering improvements may need review.
Does R&D activity make a business eligible for cost segregation?
R&D activity alone does not create cost segregation eligibility. Cost Segregation depends on commercial property facts, construction details, acquisition records, renovations, or improvements.
Can Ohio plastics manufacturers claim R&D credits?
Ohio plastics manufacturers may need to review R&D credit eligibility when projects involve polymer testing, injection molding improvements, extrusion trials, material substitution, mold changes, or technical problem-solving supported by documentation.

An R&D tax credit cost segregation strategy can help businesses evaluate separate opportunities tied to innovation, facilities, and growth. Eligibility is not automatic, and both strategies require careful documentation and technical review.

RCG Tax Partners works with companies on R&D Tax Credits, Building Cost Segregation Studies, Section 179D Energy Tax Deductions, and Cost Segregation services. For plastics and polymer companies across Ohio, RCG provides technical analysis, documentation support, and federal and state R&D Tax Credit guidance.

Ready to review whether both strategies may apply to your business? Contact RCG Tax Partners to discuss your research activity, property documentation, and next steps.