Tennessee does not offer a state-specific R&D tax credit based on qualified research expenses, but businesses can claim the federal R&D tax credit for qualified research expenses incurred in Tennessee. Additionally, a franchise and excise tax credit is available for R&D equipment investments. Contact Strike Tax to maximize your savings.

Qualifying activities must be technological in nature, aimed at developing or improving a business component, eliminate technical uncertainty, and involve a process of experimentation. Examples include product innovation or process improvements in industries like manufacturing 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. Form 6765 now includes Section G, which requests detailed business component information. For tax years beginning in 2025, the IRS has made Section G optional for all filers, but many taxpayers will still want to complete it to prepare for mandatory reporting that starts with 2026 tax years. Strike Tax ensures audit-ready documentation.

Attach Form 6765 to your federal income tax return. Tennessee does not offer a separate state R&D credit, so the federal credit is not claimed directly on the Tennessee franchise and excise return. However, your federal treatment of research expenses and taxable income will flow into the Tennessee excise tax base, so R&D planning should be coordinated with your Tennessee franchise and excise calculations. Strike Tax streamlines the process.

No new Tennessee R&D expense credit has been enacted for 2025; the existing R&D equipment credit and sales/use exemptions continue unchanged. Federally, the One Big Beautiful Bill Act (OBBBA) restores immediate expensing for domestic research and experimentation expenditures under a new Section 174A, reversing prior five-year amortization for U.S.-based R&D. The IRS introduced new Sections E, F, and G to Form 6765; Section G is optional for tax year 2025 but scheduled to become mandatory for most taxpayers beginning with 2026 tax years. Strike Tax can help navigate these updates.

The federal credit offers up to 20% on qualified research expenses exceeding a base amount, or 14% via the Alternative Simplified Credit. Tennessee businesses can stack this with excise tax planning and state equipment incentives. Strike Tax optimizes calculations.

Federal R&D credits can be carried forward for up to 20 years or back 1 year. In Tennessee, unused credits may influence franchise or excise tax strategies, while state equipment credits carry forward 15 years. Strike Tax advises on carryforward utilization.

Keep detailed records including employee time logs, project plans, expense receipts, and uncertainty documentation for at least 3 years post-filing. Tennessee's excise tax alignment requires consistent federal reporting, and state equipment credit claims need purchase and installation documentation. Strike Tax prepares for audits.

Visit IRS.gov for Form 6765 guidance or consult the Tennessee Department of Revenue for state tax interactions, including equipment credits. Strike Tax provides tailored resources and consultations for Tennessee-specific applications. This information is current as of late 2025.