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The Ohio Research and Development Tax Credit, administered by the Ohio Department of Taxation, incentivizes businesses to invest in qualified research activities within the state, providing a nonrefundable offset against the Commercial Activity Tax (CAT) under Ohio Revised Code Section 5751.51, with a similar credit under Section 5726.56 for financial institutions. Claim it directly on your tax return with no prior approval required.
Eligibility requires conducting qualified research activities (QRAs) in Ohio that meet IRC §41 standards, focused on technological uncertainty and experimentation. The credit applies to Ohio QREs only, benefiting businesses across industries like manufacturing, software development, and engineering.
Ohio uses a single, simplified calculation based on current-year Ohio QREs exceeding the average QREs from the prior three calendar years. This base period focuses solely on historical QREs (not gross receipts), making it straightforward for growing businesses. If you have little or no Ohio QRE history, your three-year average base may be very low or zero, so most or all current-year Ohio QREs can be treated as excess.
Ohio's R&D credit emphasizes simplicity and broad access, with provisions tailored to support manufacturing growth and economic development without complex certifications.
Real results from an Ohio manufacturing company
This mid-sized firm in automotive parts development documented $4.2M in QREs, exceeding their 3-year average by $1.5M to claim $105K in Ohio credits, stacked with federal for maximum ROI.
The Ohio R&D tax credit is a 7% nonrefundable credit on qualified research expenses exceeding the average of the prior three calendar years, offsetting Commercial Activity Tax liability under ORC §5751.51, with a similar credit under §5726.56 for financial institutions. It aligns with federal IRC §41 rules for in-state activities.
Eligible activities include developing or improving products, processes, techniques, formulas, or software through experimentation to resolve technological uncertainty, such as prototyping in manufacturing or algorithm optimization. Strike Tax identifies qualifying projects to ensure compliance.
For $2 million in current QREs exceeding a $1.6 million 3-year average, you could save $28,000 in state credits, plus federal stacking. Use Strike Tax’s R&D Credit Calculator for personalized estimates.
Credits are nonrefundable against CAT but carry forward up to 7 years. No cash refunds, but the credit offsets only the CAT liability on receipts above the exclusion amount. The 2024 CAT minimum tax elimination allows fuller offsets for smaller taxpayers. Strike Tax optimizes carryforward strategies.
No special application, claim directly on your Ohio CAT return (Form CAT 1 or quarterly) or pass-through forms like IT 4708. Attach supporting schedules; Strike Tax handles documentation and filing for accuracy.
Yes, because Ohio defines QREs by reference to IRC §41, the same underlying expenses can generally be used for both federal and Ohio R&D credits, subject to federal rules on section 280C and any required federal addbacks. Strike Tax coordinates claims to maximize combined savings.
The base is the simple average of Ohio QREs from the prior three calendar years (zero if none). This method simplifies calculations compared to federal fixed-base options, benefiting variable R&D spenders. With no prior QREs, current-year QREs are generally all excess.
As of 2025, the Ohio R&D Investment Tax Credit still equals 7% of excess Ohio QREs with a 7-year carryforward. Recent changes have focused on CAT filing (no annual minimum tax, higher exclusion to $6 million, quarterly filing only) and on audit and combined group rules for the credit, not on the credit rate itself. Strike Tax monitors updates.
Yes, startups with little or no prior QRE history may have a very low or zero base, allowing most eligible expenses to qualify as excess. Pair with federal payroll tax offsets (up to $500K/year for 5 years if under $5M gross receipts). Strike Tax guides early claims.
Maintain detailed project-level documentation for your QREs, including business components, uncertainties, testing, and contemporaneous time and cost records, so you are prepared for both Ohio and federal audits. Strike Tax builds audit-ready files.
Use our calculator to estimate your potential federal and state benefits.
Schedule a consultation to structure your R&D activities for maximum credits.