Health & Life Sciences

The Health and Life Science sector involves high R&D cost, manufacturing and infrastructure investment, and data, AI, and digital health innovation, all areas that are candidates for tax incentives.

Ideal Candidates:

Biotech and Pharmaceutical Firms
Hospitals, surgical centers, and outpatient clinics
Medical device manufacturers
Life science research and development companies
Senior living or healthcare housing developers

Here’s an overview of how Health and Life Science companies can benefit.

Research & Development (R&D) Tax Credit

R&D tax credits are highly applicable across biotech, pharmaceutical, medical device, and healthcare IT sectors:

Drug formulation, trials, and compliance testing
Development of medical devices and diagnostic equipment
Software development for electronic health records or telemedicine
Laboratory process improvement and automation

Benefit: Up to 10% of qualified R&D costs (wages, supplies, contract research) as a federal tax credit, with additional state-level incentives.

Cost Segregation

Applicable to hospitals, clinics, medical office buildings, life science labs, and research facilities:

Breaks out assets like medical gas systems, specialized lighting, clean rooms, and HVAC into shorter depreciable lives (5, 7, or 15 years)

Benefit: Significantly boosts early-year depreciation and cash flow.

179D Tax Deduction

For healthcare facilities investing in energy-efficient systems:

Up to $5.00 per square foot for qualifying HVAC, lighting, or building envelope systems
Hospitals, surgical centers, and medical campuses are ideal candidates

Benefit: Immediate tax deduction for energy efficiency improvements.

What Services are Included?

45L Tax Credit

If a healthcare entity develops senior living, assisted living, or workforce housing:

$5,000 per unit tax credit for residential construction that meets ENERGY STAR or Zero Energy Ready standards

Benefit: Directly reduces tax liability on qualifying residential developments.

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

Especially valuable for hospitals and life science companies with large capital investments:

Identifies costs that can be expensed rather than capitalized
Unlocks retroactive deductions for improvements or equipment

Benefit: Increases deductions and ensures compliance with IRS capitalization rules.

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

Export Tax Incentive for US manufacturers/exporters of medical equipment, devices, or pharmaceuticals:

Tax-efficient structure to shift export profits into qualified dividends

Benefit: Up to 20% tax savings on export-related income.

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.