Running a winery in California is equal parts craftsmanship, science, and constant reinvention. Whether you’re refining fermentation techniques, improving yields in the vineyard, or investing in new technology, innovation is integral to your daily operations.
What many winemakers don’t realize is that these everyday improvements may qualify for one of the most valuable federal and state tax incentives available: the Research & Development (“R&D”) Tax Credit. If you’re a winery, understanding how this credit works can translate directly into meaningful tax savings—and in many cases, cash refunds. The credit can reduce federal income tax and, for qualifying small businesses, can even offset payroll taxes.
Most people hear “R&D” and think of tech companies or biotech labs. But the tax code takes a much broader view. Any company investing time, money, or resources to develop or improve products, processes, or equipment may qualify—including wineries.
What Expenses Can Be Claimed?
Wineries can claim the credit for related Qualified Research Expenses (“QREs”), including:
- Wages – Time spent by winemakers, cellar teams, vineyard managers, lab staff, and supervising personnel who support experimentation.
- Supplies – Barrels, materials, grapes used in test batches, lab supplies, yeast, enzymes, and other consumables used in experiments.
- Contractor Costs – Outside consultants, viticulture scientists, lab testing partners, software engineers, or automation specialists.
What Activities May Qualify?
Based on our experience, below are some common activities in the winemaking space that may qualify for the R&D Tax Credit:
- Product & Fermentation Innovation – experimenting with new blends or testing alternative yeast strains
- Viticulture & Vineyard Improvements – irrigation enhancements, soil composition testing, or using sensors/smart irrigation systems
- Process & Equipment Improvements – improving bottling/labeling process, reducing waste, or introducing automation/software-driven systems
- Quality Control & Testing – lab testing to improve consistency/taste or shelf-life/contamination testing
Why Now Is the Time to Explore It
Recent tax changes under the One Big Beautiful Act (“OBBA”) have made it even more beneficial to take the R&D Tax Credit. Having said that, proper documentation is more important than ever—but the credit remains extremely valuable and often underutilized in the wine industry.
If you’ve made technological improvements dating back to 2022, you may still be able to claim the credit retroactively depending on your tax situation.
Keep an eye out for more specific tips as we get closer to year end. And if you don’t have a strategic tax advisor, feel free to reach out to our team here.
