Illinois R&D Tax Credits

Illinois provides a research and development (R&D) tax credit. Until January 1st, 2027, an R&D credit is allowed against income tax for research activities in Illinois state. The credit is equal to 6.5% of qualifying expenditures over a comparative base amount. The base amount is the average of the prior three years of QREs attributed to Illinois. Excess credits not utilized in a tax year can be carried forward up to five years.

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Businesses or taxpayers cannot take this credit for the following kinds of activities:

• research conducted after the beginning of commercial production;

• research adapting an existing product or process to a particular customer’s need;

• duplication of an existing product or process;

• surveys or studies;

• research relating to certain internal-use computer software;

• research conducted outside Illinois;

• research in the "soft sciences", social sciences, arts, or humanities;

• research funded by another person (or government entity).

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Illinois’ biggest R&D sectors are pharmaceuticals, machinery, and not surprisingly, agricultural. The state also sees innovations in the banking and insurance sectors.

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Learn more about Illinois' R&D Tax Credit law or claim Illinois' R&D Tax Credits here.

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R&D Tax Credit Available:

Yes

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Eligible Entities:

C-Corporations, S-Corporations, LLCs, Partnerships

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Deadline for Tax Filing:

Due with Illinois Tax Return

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Data Required to Compute Credit:

Claim Period Qualified R&D Expenses (QREs)

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What Information is needed?

QREs for Prior 3 Years

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Credit Carryforward:

5 Years

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The R&D tax credit equals:

• 6.5% on the excess of IL qualified research expenses over the average amount of QREs for the three preceding taxable years.

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Specific Item to Note:

• The Illinois research credit will expire on December 31st, 2027, unless additional legislation is passed.