65%
of pilot fee eligible for federal contract research inclusion
~⅓
of pilot cost potentially offset by combined credits
maximum federal ASC credit rate on qualifying R&D wages
14%
38
us states offer R&d tax credit incentives on top of federal-level support
The federal R&D credit was designed for exactly this type of work - activities involving experimentation, technical uncertainty, and iterative development toward a specific business application.
Why It Qualifies?
Custom AI Development Fits the
R&D Credit Framework
Technical Uncertainty
AI pilots involve unresolved technical questions: whether a model will perform adequately, how it should be structured, and how it integrates into your existing workflow. This uncertainty is a core qualifying criterion.
Process of Experimentation
Iterative testing, prompt engineering, evaluation cycles, and model refinement all constitute a qualifying process of experimentation - even when the outcome is uncertain at the outset.
Technological in Nature
Custom AI systems rely on the principles of computer science, engineering, and applied mathematics, thus meeting the requirement that qualifying research must be technological in nature.
Under the Alternative Simplified Credit (ASC) method, qualifying R&D activities generate a credit of 11.06% to 14%. Both the pilot fee and your internal team's time can contribute to the qualifying base.
ASC Method — 11.06% to 14%
The Alternative Simplified Credit method applies a credit rate to qualifying research expenditures above a baseline. The exact rate depends on how prior-year R&D is treated in your tax filing.
Contract Research at 65% Inclusion
When you contract with SelfFull for a pilot, 65% of qualifying payments may be counted as qualifying research expenditure in your federal credit calculation.
Your Team's Time Also Counts
Time your team spends participating in the pilot, whether in working sessions, testing, feedback, or review, may qualify as internal R&D wages, which compounds the total credit opportunity.
How the Federal R&D Credit
Works for Our Pilots
Available to Businesses of All Sizes
The federal R&D credit is not exclusive to large enterprises - there is no "right size" to be eligible for the R&D tax credit program!
The following is a conservative, illustrative example based on a real pilot engagement with a client from New Jersey. All amounts and rates should be confirmed with your tax advisor.
What This Could
Look Like for a Client
Here's an Example
Case Study: An AI Pilot Client from New Jersey
Pilot fee
Federal contract research inclusion
Client team size
Participation per person
Estimated hourly cost
65%
$10,000 – $15,000
Federal ASC credit rate
NJ state credit rate (illustrative)
10%
11.06% – 14%
~$100/hr
3-4 weeks
client team participation in pilot
5–10 hrs / week
5 people
Combined estimated credits
$2,298 – $6,165
All figures are illustrative and conservative. Actual credit amounts depend on your tax situation, qualifying activity classification, and your tax advisor's final calculations. SelfFull is not a tax advisor.
$7,500 – $20,000
Client wage base (illustrative)
NJ state credit rate (illustrative)
10%
Claiming R&D credits requires organized records. We structure our engagements to make that straightforward - without adding burden to your team.
We Make the Documentation
Easy to Hand Off
How We Support You
Activity tracking throughout the pilot
Clean handoff package for your tax advisor
Advisor alignment support on request
Answers to the questions we hear most often from business leaders exploring this opportunity for the first time.
Frequently Asked Questions
Does custom AI development qualify for R&D tax credits?
Yes, in most cases. Custom AI development qualifies for federal R&D tax credits under Section 41 of the Internal Revenue Code when the work involves technical uncertainty, a process of experimentation, and is technological in nature.
Activities such as model development, iterative testing, prompt engineering, and integration work against real business use cases typically meet these criteria. Your tax advisor should confirm eligibility based on your specific circumstances.
Can a company claim R&D credits for an AI pilot they hired someone else to build?
Yes. The federal R&D tax credit includes a provision for contract research expenditures. When a company pays a third party to conduct qualifying research on its behalf, 65% of that payment may be included in the company's qualifying research expenditure base for calculating the credit.
This means clients who commission custom AI development from SelfFull may include a portion of the pilot fee in their own R&D credit calculation - even though SelfFull performed the development work.
What documentation is needed to claim R&D credits for an AI project?
To support an R&D tax credit claim for a custom AI project, you typically need records that demonstrate the qualifying nature of the activities performed. This includes logs of working sessions and experimentation cycles, descriptions of the technical uncertainty being addressed, evidence of the iterative process used to resolve that uncertainty, and records of wages and contract fees attributed to the qualifying work.
SelfFull tracks pilot activities, working sessions, and supporting detail throughout engagements and can compile a clean handoff package for your tax advisor at the end of the pilot.
We will walk through the AI R&D credit opportunity with you, help you understand what qualifies, and structure the engagement so your tax team has everything they need - all while delivering an AI solution that with measurable business value in just 6 weeks.
Let's Look at What Your
Pilot Could Earn Back
Ready to Explore?
