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R&D Tax credits and Software engineers: What is the connection?

Did you know that more than 80% of technology companies are either completely unaware they are eligible for government-sponsored tax credits or don’t have an easy way to get them? As many startups are thinking about ways to be efficient with spending, we want to do our part as well. 

We asked our friends at TaxTaker, to share about the Research & Development Tax Credit – which can save a company thousands of dollars (sometimes even hundreds of thousands) every year. 

The R&D tax credit allows technology companies and startups to reduce federal and state tax liabilities and earn back up to 10% on what they are spending on product development. Four types of expenses can be included in the credit calculation for your qualified projects: 

  1. W2 Wages
  2. US-based contractor expenses
  3. Cloud expenses
  4. Supplies

So how do you take advantage of this? Well, TaxTaker told us that employee wages for direct R&D activity can be included in the credit (as well as supervision or direct support of such activity). So thinking about bringing on a new frontend developer? With R&D tax credits, it is possible to recover 10% of their wage every year. 

TaxTaker also informed us the most common employee titles that qualify for the R&D tax in technology companies include:

  • Product engineers
  • Software and database architects
  • Computer and data scientists
  • Quality assurance testers

The long and short of it, tech startups have the potential to earn back up to 10% of what they spend developing products and technologies each year.

This is a heavily wage-driven credit, so the greater your salaries, the greater your relative credit adds up!  What’s more, starting in 2023, you can also use the R&D Tax Credit to offset all employer-related payroll taxes (FICA+ Medicare, 7.65%-double check this).  Further, as part of the Inflation Reduction Act, the upper bound for startups increased to $500,000, so regardless of profitability, your startup can reap the benefits nearly immediately.

If you want to learn more about R&D tax credits please talk to your accountant (we are not tax experts) or reach out to our friends at TaxTaker.

Data Share: Candidate and Client Survey Q3

Every quarter we gather data from both our clients and our candidates that received an offer through SingleSprout in ’22. We asked a few new questions this quarter, and some of the most interesting data is below.

From the Candidates Survey 

The majority of the folks who participated are software engineers and product managers, 5-13+ years of experience (mid-level to manager), at startups w/ 10-500 people, who received offers through SingleSprout companies.

  • 72.4% of candidates reported that they made their final decision based on compensation. The next most important factor was flexible workspace (ie Remote) and company mission
  • These same candidates said they responded to our emails about a new role because the skills of the role matched – 58.6% (top answer) 
  • 70.3% of candidates negotiated their base before accepting the last offer. 
  • 83% of candidates had previous startup experience with  26% having more than 6 years of startup experience. 

From our Clients

  • Greenhouse is still the most popular ATS among our clients. 
  • 78.9% of our clients say the best benefit of SingleSprout is our Quality Candidates. 

If you have any questions or want to dig deeper into the data, please reach out to our team. 


SingleSprouts Q3 22 Engineering Compensation Report.

It has been a difficult quarter for most of the hiring market, with hesitation from both clients and candidates. That being said, our team has quickly adapted to the new hiring market, and we have been able to help numerous companies find amazing talent.  In fact, we are still on pace to have our best year ever.  With amazing placements, comes amazing data – that we are happy to share with our network.  


Here is a link to SingleSprouts Q3 22 Engineering Compensation Report.

Referral  program
Do you know of any Engineers, Product Managers, Designers, or Attorneys?

At the end of each year, we donate a portion of our proceeds from successful candidate referrals to the following forward-thinking, social good organizations: