A common question is the difference between software testing and qualified research for the R&D tax credit. The short answer is that routine software testing against known specifications generally is not qualified research. Testing that evaluates alternatives to resolve a technical uncertainty may warrant review, subject to internal-use software rules. This page explains the framework in general terms. It is educational and is not individualized advice. For the foundational framework, see our page on qualified research.
Routine Software Testing
Routine software testing — testing software against known specifications using established test methods — generally is not qualified research. The characteristics include:
- Known test — the test is established and documented.
- Known specification — the specification is known.
- Expected result — the expected result is known (pass or fail).
- Verification, not evaluation — the testing verifies conformance, it does not evaluate alternatives.
Where all four are present, the work is verification, not experimentation.
Testing That May Warrant Review
Software testing may warrant review when it involves a technical uncertainty and a process of experimentation:
- New performance — testing alternative approaches to resolve uncertainty about whether software can achieve a new performance target.
- New platform — testing alternative approaches to resolve uncertainty about whether software can function on a new platform.
- New load — testing alternative approaches to resolve uncertainty about whether software can handle a new load.
Where the testing involves evaluating alternatives to resolve a technical uncertainty, the work may warrant review, subject to the internal-use software rules under Section 41(d)(4)(E).
Hypothetical Example
Consider a company that runs standard unit tests and integration tests on its software. This is routine testing, not research.
By contrast, if the company tests alternative approaches to resolve uncertainty about whether its software can handle a new load level, and evaluates the alternatives through a structured process, the work may warrant review as qualified research.
These examples are illustrative only and do not state whether any particular activity qualifies.
Documentation That May Help
Records that can help support the testing vs. research analysis include records showing the purpose of the testing (verification or evaluation of alternatives), records of the technical uncertainty (if any), and records of the process of experimentation (if any). For more, see our page on R&D tax credit documentation.
Key Takeaway
Routine software testing against known specifications generally is not qualified research. Testing that evaluates alternatives to resolve a technical uncertainty may warrant review, subject to internal-use software rules. Because the distinction is fact-specific, professional review is appropriate before claiming the credit.