The R&D Tax Credit:
What It Is, Who Qualifies, and How to Claim It
The R&D tax credit (IRC Section 41) reduces your tax liability dollar-for-dollar based on qualified research expenses. Any U.S. business that develops or improves products, processes, software, or techniques may qualify. The credit typically provides 6% to 8% of qualifying expenses, and over 35 states offer additional credits that stack with the federal benefit. Check if you qualify or learn how to claim.
$
300
m+
Credits Delivered
for 1,100+ clients
6-
10
%
Typical Credit
of qualifying expenses
20
Year Carryforward
for unused credits
100
%
Audit Defense
on every engagement
Understanding the Credit
What Is the R&D Tax Credit?
The Research and Development tax credit is a permanent federal incentive established in 1981 and made permanent under the PATH Act of 2015. It rewards U.S. businesses of all sizes for developing or improving products, processes, formulas, or software. For more details, see the IRS Research Credit page.
This is a dollar-for-dollar reduction in your federal income tax liability. Unlike a deduction that reduces taxable income, the R&D credit directly reduces the taxes you owe. A $100,000 credit means $100,000 less in taxes paid.
You do not need a laboratory, scientists, or white coats to qualify. Companies in software development, manufacturing, architecture, food and beverage, agriculture, aerospace, and dozens of other industries claim R&D credits every year for activities their teams already perform. For a detailed analysis of how IRC Section 280C elections interact with the credit, see our Section 280C election guide.
"The R&D tax credit is the single largest dollar-for-dollar tax incentive available to U.S. businesses investing in innovation. Most companies that qualify do not realize they are eligible."
Source: IRS Publication 535, Business Expenses
Eligibility Overview
Who Qualifies for the R&D Tax Credit?
Any U.S. business investing in innovation may qualify. Here is a quick overview. For the full eligibility breakdown, including the IRS Four-Part Test, see our detailed eligibility guide.
C-Corporations
File Form 6765 with your corporate income tax return to claim the credit directly against federal tax liability.
S-Corps & Partnerships
Credits flow through to individual shareholders and partners on Schedule K-1 for use on personal returns.
Startups & Small Businesses
Qualified small businesses can offset up to $500,000 per year in payroll taxes, even with no income tax liability.
Foreign Companies with U.S. R&D
Non-U.S. entities performing qualified research in the United States or its territories can claim the credit.
Companies at a Loss
No profit required. Credits carry forward up to 20 years and can be claimed retroactively for open tax years.
All Industries
Software, manufacturing, engineering, food and beverage, agriculture, aerospace, pharma, and many more qualify.
Want the full eligibility breakdown? See our detailed R&D Tax Credit Eligibility Guide, including the IRS Four-Part Test, qualifying industries, and common misconceptions.
How Does the R&D Tax Credit Work?
The Four-Part Test
Identify Qualified Research Activities
Your activities must meet the IRS four-part test: technological in nature, intended to eliminate uncertainty, involve a process of experimentation, and serve a permitted purpose such as creating or improving a product, process, or software.
Wages, supplies, contract research
Calculate Qualified Research Expenses
QREs include W-2 wages for employees performing or supervising R&D, supplies consumed during research, 65% of contract research payments to third parties, and cloud computing costs tied to development.
Startups can offset payroll taxes via the qualified small business payroll tax credit. Learn more on our Payroll Tax Credit page.
6-10% of qualifying expenses
Compute the Credit Using Form 6765
Most companies use the Alternative Simplified Credit method: 14% of QREs exceeding 50% of the average QREs from the prior three tax years. The regular method uses 20% above a historical base amount.
The credit is claimed on Form 6765.
Amended or original returns
File and Claim Your Credit
Submit Form 6765 with your federal income tax return. For prior years, amend returns going back up to three years. Unused credits carry forward for 20 years under IRC Section 39.
For the complete step-by-step claiming process, documentation requirements, and filing deadlines, see our full guide on How to Claim the R&D Tax Credit.
Federal & State Credits
How Do Federal and State R&D Tax Credits Compare?
Federal Credit (IRC Section 41)
Provides 6-10% of qualified research expenses as a direct reduction in federal income tax. Permanent since 2015. 20-year carryforward on unused credits.
State Credits (35+ States)
Most states offer additional R&D credits ranging from 5% to 20% of qualifying expenses. Some states offer refundable credits providing cash even without state tax liability.
OBBBA Changes (2025)
The One Big Beautiful Bill Act retroactively restored immediate R&D expense deduction for 2022-2024. Companies that skipped credits during those years can now amend returns and recover refunds.
Compare All Details
See a full comparison of federal vs. state R&D tax credits, eligibility differences, and stacking strategies.
State Credits by State
Explore which states offer R&D tax credits, credit rates, and refundability details.
Qualifying Industries
Which Industries Qualify for R&D Tax Credits?
The R&D tax credit applies to far more industries than most businesses realize. If your company develops or improves products, processes, or software, you likely qualify.
Software & Technology
AI, SaaS, cybersecurity, fintech, mobile apps, cloud platforms
Manufacturing
Process optimization, new materials, automation, tooling, quality systems
Architecture & Engineering
Structural design, LEED, civil engineering, building systems
Medical & Pharmaceutical
Drug development, clinical trials, medical devices, diagnostics
Aerospace & Defense
Propulsion, avionics, satellite tech, defense systems
Food & Beverage
Formulation, shelf life, packaging, production processes
Agriculture
Precision farming, crop breeding, sustainable practices, AgTech
Engineering
Civil, structural, mechanical, electrical, environmental engineering
Explore all qualifying industries in our industries directory.
Real Results
R&D Tax Credits We Have Delivered
$
3.7
m
Robotics Firm
35 employees. 70% of wages and 90% of expenses qualified. Custom robotics design, production, and integration.
$
668
k
Cybersecurity Company
SaaS firm with patent-pending encryption development. Qualified for federal and state credits.
$
657
k
Automotive Manufacturer
30 employees. Custom racing engine design and manufacturing innovation qualified at 62% of wages.
OBBBA Update
Can You Recover R&D Credits from 2022 Through 2024?
The One Big Beautiful Bill Act (OBBBA) retroactively repealed Section 174 amortization for domestic research expenses. Companies that stopped claiming R&D credits or reduced their claims during 2022, 2023, and 2024 can now amend their federal tax returns and recover those credits as refunds. Read our complete analysis: OBBBA reinstates immediate R&D expensing.
For S-Corporations, the amended return deadline for tax year 2022 was March 15, 2026. C-Corporation and individual deadlines follow. The window to recover these credits is closing.
"If your company skipped R&D credits during 2022-2024 because of Section 174 amortization, you likely overpaid federal taxes. The OBBBA fix is retroactive. Amend your returns and recover what you are owed."
Why Strike
Why Choose Strike Tax Advisory?
$300M+ in Credits Delivered
For more than 1,100 clients across software, manufacturing, aerospace, engineering, food and beverage, agriculture, and dozens of other industries.
Zero Upfront Fees
Strike works on 100% contingency. You pay nothing unless we successfully identify and deliver R&D tax credits.
Free Unlimited Audit Defense
Every engagement includes Strike Shield audit protection. If the IRS reviews your claim, we defend it at no additional cost.
No Obligation
Free 15-Minute Assessment
We can usually tell you within 15 to 30 minutes whether your company has a meaningful R&D credit opportunity and give you a rough estimate of the potential savings.
No cost. No obligation. No pressure.
Quick Estimate
Estimate Your R&D Tax Credit
Use our free calculator to get a quick estimate of how much your company could save.
R&D Tax Credit: Frequently Asked Questions
The R&D tax credit (IRC Section 41) is a permanent federal incentive that provides a dollar-for-dollar reduction in income tax for businesses investing in qualified research activities. It typically equals 6% to 10% of qualifying research expenses, including employee wages, supplies, and contract research costs.
Any U.S. business that develops or improves products, processes, formulas, or software may qualify. This includes companies in software, manufacturing, engineering, food and beverage, aerospace, agriculture, and many other industries. You do not need a laboratory or scientists. The activity must pass the IRS four-part test.
The credit typically ranges from 6% to 10% of qualified research expenses. The exact amount depends on your wages, supplies, and contract research costs. Startups and qualified small businesses can also offset up to $500,000 per year in payroll taxes.
Yes. Companies operating at a loss can still claim the credit. It carries forward for up to 20 years until you have tax liability to offset. Qualified small businesses with gross receipts under $5 million can apply up to $500,000 annually against payroll taxes.
No. Claiming R&D credits does not automatically trigger an audit. The IRS has a dedicated review process for R&D claims that is separate from general audits. Well-documented claims with the four-part test properly substantiated face minimal scrutiny. Strike provides free unlimited audit defense on every engagement.
The OBBBA retroactively repealed Section 174 amortization for domestic R&D expenses for tax years 2022 through 2024. Companies that stopped claiming credits during those years can now amend their returns and recover refunds. Filing deadlines vary by entity type.
You can amend federal tax returns for up to three years from the original filing date. For example, a 2022 return filed April 15, 2023 can be amended through April 15, 2026. Unused credits carry forward for 20 years under IRC Section 39.
How Much Could Your Company Save with R&D Tax Credits?
Strike Tax Advisory works on contingency with zero upfront fees. If we do not find credits, you pay nothing. Free unlimited audit defense included on every engagement.