District of Columbia R&D Tax Credits

The District of Columbia does not offer a state-specific R&D tax credit, but businesses can claim the federal R&D tax credit for qualified research activities in D.C. Contact Strike Tax to maximize your savings.

Qualifying activities must be technological, aimed at developing or improving a business component, eliminate uncertainty, and involve experimentation. Examples include software innovation or process improvements in industries like tech or consulting. Strike Tax can identify qualifying projects.

Savings can reach up to 20% of QREs exceeding a base amount or 14% under the alternative simplified method. Use Strike Tax’s R&D Credit Calculator for a personalized estimate.

Yes, startups can claim the federal R&D credit, including a payroll tax offset of up to $500,000 annually for up to five years if gross receipts are under $5 million and no receipts for more than five years. Strike Tax can guide eligibility.

Maintain contemporaneous records such as project descriptions, time tracking, wage allocations, supply costs, and contract research agreements. For tax year 2025, Section G of Form 6765 is optional for all filers while the IRS finalizes the new reporting requirements. Starting with tax year 2026, Section G is expected to be mandatory for most filers, with limited exceptions for certain small businesses and smaller claims. Strike Tax ensures audit-ready documentation.

For 2025, Washington DC still has no state R&D credit. Federally, OBBBA restores immediate expensing for domestic R&D under Section 174, while DC’s 2025 conformity legislation decouples from those Section 174 expensing changes and prevents amended DC returns that would reduce net income solely due to OBBBA R&D expensing. Strike Tax can help navigate these updates.

The federal credit is generally 20% of qualified research expenses over a base amount, or 14% under the Alternative Simplified Credit (ASC) method, applicable to D.C.-based activities. Strike Tax optimizes your calculation method.

Qualified Research Expenses include wages for research personnel, supplies used in experimentation, 65% of contract research payments, and costs for basic research to universities. Strike Tax reviews your expenses for full eligibility.

Subtract the base amount (fixed percentage of prior gross receipts) from current QREs, then apply 20% (or 14% ASC). For example, $1M QREs with $600K base yields $80K credit. Strike Tax provides precise computations.

The federal R&D credit only reduces your federal income tax liability. DC does not offer a separate R&D credit, and the federal credit does not directly reduce DC franchise or income taxes. However, your underlying R&D deductions and expense treatment under Section 174 and Section 41 interact with DC’s conformity rules and decoupling, so the net DC impact should be modeled carefully. QHTC incentives, where available, can complement the federal credit but operate under separate rules.