SCOTTSDALE, Ariz. — June 23, 2026 — Does AI qualify for the R&D tax credit? The short answer is yes — but the details matter. Two categories of companies claim AI-related R&D tax credits. First, companies that build AI: they train models, develop new algorithms, engineer novel architectures, or create proprietary machine learning pipelines. Second, companies that use AI to transform their operations: they deploy AI tools to automate processes, improve decision-making, or create new product capabilities. Both can qualify under Section 41 of the Internal Revenue Code, provided the work meets the IRS Four-Part Test.

The AI Four-Part Test: How the IRS Evaluates Your Claim
The IRS evaluates every R&D credit claim against four criteria: (1) permitted purpose — developing a new or improved business component; (2) technological uncertainty about capability, method, or design; (3) a process of experimentation that systematically evaluates alternatives; and (4) work that is technological in nature, relying on principles of engineering, computer science, or the physical or biological sciences.

AI Activities That Qualify
- Training custom machine learning models on proprietary datasets
- Developing novel neural network architectures
- Building computer vision systems for quality control
- Creating natural language processing pipelines for document analysis
- Engineering recommendation engines
- Developing autonomous systems
- Building predictive maintenance algorithms

AI Activities That Do Not Qualify
- Purchasing off-the-shelf AI software
- Using pre-built APIs without modification
- Routine data entry or data cleaning
- Marketing analysis using existing tools
- Standard IT infrastructure maintenance

A Real-World Example
A fintech company develops a custom fraud-detection model using proprietary transaction data, testing different architectures to improve accuracy from 87% to 96%. The work demonstrates genuine technological uncertainty and systematic experimentation — and qualifies.

Generative AI: Vibe Coding, Agents, and the New Frontier
"Vibe coding," where developers use AI to generate code iteratively, can qualify if the developer directs genuine experimentation to resolve technical uncertainty. The key question is whether the developer is resolving technological uncertainty about design, method, or capability — not simply using AI as a productivity tool.

Qualified Research Expenses for AI Companies
QREs for AI companies typically include wages for ML engineers, data scientists, and software developers; cloud-computing costs for model training; supplies used in experimentation; and up to 65% of contract research expenses.

How OBBBA and Section 174A Changed the Math
The One Big Beautiful Bill Act created Section 174A, restoring immediate expensing for domestic R&D costs starting in 2025. AI development costs are now fully deductible in the year incurred, rather than amortized over five years. Small businesses under $31 million in gross receipts can apply this retroactively to 2022–2024.

Documentation That Survives an Audit
Maintain contemporaneous records: project narratives describing technological uncertainty and experimentation; experiment logs with dates, approaches tested, and outcomes; technical decision documents explaining design choices; and time-tracking records for personnel involved in qualifying activities.

Five Mistakes Companies Make
1. Assuming AI work automatically qualifies
2. Poor documentation
3. Overlooking cloud-computing costs
4. Missing the payroll tax offset
5. Not claiming state credits

About Strike Tax Advisory
Strike Tax Advisory is an R&D tax credit specialty firm based in Scottsdale, Arizona, with a team of CPAs, attorneys, and engineers experienced in AI-related R&D tax credit claims. The firm identifies, documents, and defends federal and state R&D tax credits under Section 41 for companies developing and deploying artificial intelligence — having delivered over $300 million in credits for more than 1,100 clients, on a contingency basis with zero upfront fees and Strike Shield unlimited audit defense. For a free consultation to evaluate your AI R&D activities, visit https://www.striketax.com.

Media Contact
Strike Tax Advisory
11445 E Via Linda, ST 2-475, Scottsdale, AZ 85259-2655
Phone: 1-800-916-5165
Email: [email protected]
Web: https://www.striketax.com