South Dakota R&D Tax Credits

South Dakota does not offer a state-specific R&D tax credit, but businesses can claim the federal R&D tax credit for qualified research expenses incurred in South Dakota. 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 development or process improvements in industries like agriculture or tech. Strike Tax can identify qualifying projects.

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 years beginning after December 31, 2024, the IRS has introduced new Section G on Form 6765 for business component level reporting. After recent transition relief, Section G is optional for 2025 returns, but it is expected to be mandatory for many taxpayers starting in 2026. Qualified small businesses that elect the payroll offset and taxpayers with total QREs of $1.5 million or less and gross receipts of $50 million or less are exempt once Section G becomes mandatory. Strike Tax ensures audit-ready documentation.

Attach Form 6765 to your federal tax return. In South Dakota, no state income tax, so no adjustment needed, but report if it impacts other taxes. Strike Tax streamlines the process.

South Dakota maintains no state R&D credit in 2025, with no changes to its absence. Federally, the R&D credit remains stable under IRC §41, while separate 2025 legislation restores immediate expensing of many domestic R&D costs under Section 174 and introduces new qualitative reporting via Form 6765 Section G. Section G is optional for 2025 but is expected to be mandatory for most larger claimants starting in 2026, generally those with more than $1.5 million of total QREs and more than $50 million of gross receipts, with smaller taxpayers and qualified small businesses electing the payroll offset exempt. No state-specific updates apply due to the lack of income tax. Strike Tax monitors federal adjustments for optimal claims.

With no state income tax in South Dakota, the federal credit directly reduces federal liability without state conformity issues. For qualified small businesses, the credit can offset up to $500,000 of payroll taxes annually for up to five years, providing immediate cash benefits. Strike Tax optimizes for multi-state operations.

Yes, the federal credit is based on nationwide qualified research expenses (QREs), not limited to South Dakota activities. However, apportionment may apply for multi-state businesses. Strike Tax handles allocation to ensure full eligibility.