AI & Blockchain Development - Specialty Tax Advisors

The AI & Blockchain Development sector involves high R&D, infrastructure investment, and rapid technological advancement, all areas that are candidates for tax incentives.

Ideal Candidates:

AI labs, ML developers, blockchain startups
Crypto infrastructure companies
Data center operators
Smart contract developers
Companies manufacturing exportable tech products

Here’s an overview of how AI and Blockchain companies can benefit.

Research & Development (R&D) Tax Credits

Software development for AI models, blockchain infrastructure, or decentralized applications typically qualifies for generous R&D credits:

Development of machine learning algorithms or neural networks
Training datasets and experimentation
Creating smart contracts and blockchain protocols
Enhancing system architecture for scalability, security, or decentralization

Benefit: Up to 10% of eligible R&D expenses as a federal tax credit, with additional state-level incentives in many jurisdictions.

Cost Segregation

For companies purchasing, building facilities, developing data centers, tech campuses, or server rooms can accelerate depreciation on:

Servers, electrical, HVAC for climate control, specialized cabling
Security systems, backup power, and dedicated cooling

Benefit: Reclassifies 39-year assets into 5, 7, or 15-year property, generating significant year-one deductions.

Section 174 (Amortization of R&D Costs)

Under the new rules (post-2022), R&D costs must be capitalized and amortized over 5 years (15 years for foreign work), but a thorough R&D study can:

Identify all qualifying costs
Prepare for audit defense
Maximize amortizable amounts and avoid misclassification

Benefit: Ensures compliance and optimizes deductions despite tax law changes.

What Services are Included?

179D Tax Deductions

AI and blockchain infrastructure and data centers often relies on high-energy consumption facilities:

If facilities meet energy efficiency thresholds, they may qualify for 179D deductions (up to $5.00/sq ft)

Benefit: Deduction for qualifying energy-efficient building systems.

IC-DISC (Interest Charge – Domestic International Sales Corporation)

Export Tax Incentive for US manufacturers of AI-embedded hardware, chips, or blockchain devices that are exported:

IC-DISC allows export profits to be taxed as qualified dividends

Benefit: 10–15% reduction in federal tax on export-related income.

Section 263A (Uniform Capitalization Rules) & Fixed Asset Reviews

For tech companies capitalizing software or hardware builds:

Identifies misclassified costs
Helps recover deductions via catch-up depreciation or write-offs

Benefit: Retroactive tax savings and improved asset tracking.

Form 3115

A Form 3115 - Application for Change in Accounting Method, allows businesses to request approval from the IRS to change their accounting method. This form might be required when making changes to claim various tax credits.

Changing Depreciation Method
Inventory Method
Accounting for Repairs vs. Capital Improvements

Benefit: Tax relief through audit protection, improved financial reporting accuracy, potential tax benefits, and compliance with IRS Regulations.

Payroll Tax Reduction Strategy

Companies with W2 employees will qualify for this tax credit program.

Proven ROI with significant Payroll Tax savings recognized on first payroll cycle
Eligible employees see an increase in net take-home pay
Zero upfront or out-of-pocket cost to employer or employee
Attract and retain top talent
Audit compliance

Benefits: Employer FICA Tax Savings is $56.80 per month or $681.60 per year per eligible employee. Employee FICA/State/Federal Tax Savings includes an approximate 3-4% increase in monthly net take-home pay.