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Research and Development (R&D) tax credits provide businesses with valuable incentives to invest in innovation. While the federal R&D tax credit is well-known, many states also offer their own R&D tax credits, allowing businesses to double their savings at both the state and federal levels. These credits can help companies offset tax liability, fund future research, and enhance their competitive edge.
Each state has its own unique R&D tax credit program, with varying eligibility requirements, credit percentages, and carryforward rules. Whether your business is developing new products, improving processes, or investing in technological advancements, you may qualify for these valuable incentives. Our team specializes in helping businesses navigate both state and federal R&D tax credits, ensuring you maximize every opportunity available. Explore the details of each state’s R&D tax credit below, and let us help you claim what you deserve.
As of 2025, 37 states provide their own R&D tax credit programs, giving businesses even more opportunities to reduce tax liability alongside the federal credit. Below is a state-by-state breakdown of available incentives:
Arizona offers a Credit for Increased Research Activities to encourage businesses conducting qualified research and development within the state. This credit is based on the federal R&D tax credit (IRC § 41) but applies specifically to research performed in Arizona. Eligible taxpayers include C corporations, S corporations, partnerships, and certain exempt organizations with unrelated business taxable income (UBTI). The credit can be calculated using either the regular method or the Alternative Simplified Credit (ASC) method, allowing businesses to choose the most advantageous option. Additionally, small businesses with fewer than 150 full-time employees may qualify for a refundable portion of the credit if they receive pre-approval from the Arizona Commerce Authority.
The credit amount is 24% of qualified research expenses up to $2.5 million and 15% for expenses exceeding that amount. Research conducted through Arizona universities and research organizations may also qualify for an additional credit. If a business qualifies for the refundable portion, it can receive up to 75% of the excess credit, provided it has obtained a Certificate of Qualification from the Arizona Commerce Authority. Unused credits can be carried forward for 15 years (for credits established before 2022) or 10 years (for credits established after 2021).
Arkansas offers a comprehensive R&D tax credit program to support businesses engaged in innovation and technological advancements within the state. The credit is available for qualified research expenses (QREs) conducted in Arkansas and requires businesses to invest in a project under one or more R&D programs approved by the Arkansas Science and Technology Authority (ASTA). Projects must directly involve an Arkansas-based business and receive approval from ASTA’s Board of Directors. Additionally, companies must sign a financial incentive agreement with the Arkansas Department of Economic Development (ADED) to qualify, with credits available for the first five years following the agreement.
The state offers several R&D tax credits depending on the nature of the research. In-house R&D allows businesses to claim a 20% credit on QREs exceeding the base year for three years, plus the incremental increase for the next two years. Businesses conducting research in strategic value areas can qualify for a 33% credit on in-house QREs up to $50,000 per year. Similarly, companies partnering with Arkansas universities for research may claim a 33% credit on eligible expenditures. Additionally, targeted businesses—those meeting specific investment, wage, and industry criteria—can apply for a 33% credit on QREs for up to five years, with the option to sell the credit upon approval. Arkansas R&D tax credits are non-refundable but can offset 100% of state tax liabilities, with unused credits carried forward for up to nine years. To apply, businesses must submit a detailed project plan and obtain a Certificate of Tax Credit from ASTA.
California offers an R&D tax credit to support businesses that invest in innovation and technology within the state. It’s based on the federal research credit, but with some key differences. If your company conducts qualified research activities in California—like developing new products, improving existing ones, or advancing technology—you may be eligible. The credit helps offset state income tax, making it a great way for businesses to reinvest in their own growth.
The credit amount is 15% of qualified research expenses that exceed a base amount, plus 24% of basic research payments made to universities or research institutions. California also offers an Alternative Incremental Credit (AIC) method, but once you choose it, you’ll need state approval to switch back. While this credit isn’t refundable, any unused amount can be carried forward indefinitely until fully used. To claim it, businesses just need to file the right forms with their California state tax return.
Colorado offers an Enterprise Zone R&D Tax Credit to help businesses invest in research and development while supporting economic growth in designated enterprise zones—areas with high unemployment, low income, or slow population growth. If your business is located in one of these zones and increases its R&D spending compared to the previous two years, you may qualify for a 3% state income tax credit on the difference. This incentive is designed to encourage businesses to reinvest in innovation while also stimulating local economies.
If your tax credit exceeds your tax liability, you can carry the unused amount forward indefinitely until it’s fully used. Since the program is part of the broader Enterprise Zone (EZ) Program, each local enterprise zone administrator manages their area’s incentives, so eligibility and application processes may vary. There’s no set deadline to apply—it’s a rolling application process—but it’s a good idea to check with your local enterprise zone administrator to ensure your business qualifies.
Connecticut offers an R&D Tax Credit to businesses that invest in research and development activities within the state. This credit is available to companies that incur qualified research expenses under IRC § 174, including costs for experimental models, product development, and patent-related expenses. The credit applies to research conducted in Connecticut and is based on a company’s total R&D expenses for the year.
The credit rate varies based on the company’s size and revenue. Qualified small businesses (those with gross income under $100 million) can claim a 6% credit on their total R&D expenses. Larger companies must follow a tiered credit structure, ranging from 1% for expenses under $50 million to 6% for expenses over $200 million. If a company’s tax liability is less than the credit, unused credits can be carried forward for up to 15 years (or indefinitely for credits earned before 2021). Additionally, small businesses with under $70 million in gross income that have no tax liability can exchange the credit for a refund worth 65% of its value. To claim the credit, businesses must submit Form CT-1120 RDC with detailed documentation.
Delaware offers an R&D tax credit designed to encourage businesses to invest in research and development within the state. Companies can choose between two methods to calculate their credit: 10% of the increase in Delaware qualified R&D expenses over their base amount or 50% of Delaware’s share of their federal R&D credit, using the alternative simplified credit (ASC) method under IRC § 41(c)(5). Businesses make this election annually, and it does not have to match their federal R&D credit method.
For small businesses (those with less than $20 million in average annual gross receipts), the credit amounts double, increasing to 20% of the increase in R&D expenses or 100% of Delaware’s apportioned share of the federal credit. Unlike many other states, Delaware’s R&D credit is fully refundable, meaning if the credit exceeds a business’s tax liability, the excess is refunded as a payment. Partnerships can also allocate the credit among partners based on federal tax rules. To qualify, businesses must ensure that their R&D expenses are incurred within Delaware, and the credit remains available even if the federal R&D credit is ever repealed.
Florida offers a Research and Development (R&D) Tax Credit for businesses in target industries that invest in innovation. Unlike many other states, Florida's R&D credit has an annual cap of $9 million and requires businesses to apply for an allocation during a specific window. For 2025, businesses can apply for credits related to 2024 expenses from March 20 to March 26, 2025. To qualify, companies must be classified as target industry businesses, which include manufacturing, life sciences, IT, aerospace, homeland security, cloud computing, marine sciences, materials science, and nanotechnology. A certification letter from the Florida Department of Commerce is required to apply.
Only corporations subject to Florida's corporate income tax can claim the credit—partnerships and LLCs taxed as partnerships do not qualify. Businesses can apply for either 10% of their increased R&D expenses over the prior year or 50% of Florida’s share of their federal R&D credit (using the Alternative Simplified Credit method). The credit is not refundable, but unused amounts can be carried forward. Because the credit is capped at $9 million annually, if total applications exceed that amount, credits are prorated among applicants.
Georgia offers an R&D tax credit to encourage companies to invest in innovation, whether they are startups, first-time R&D investors, or established businesses expanding their research efforts. If a company increases its qualified research spending in Georgia, it may be eligible for this credit, which helps offset tax liability and reduce operational costs. The credit is based on a portion of the increase in R&D spending, making it especially beneficial for businesses that are actively growing their research activities.
The credit can be used to offset up to 50% of a company’s net Georgia income tax liability after applying all other credits. Unused credits can be carried forward for up to 10 years, allowing businesses to take full advantage of the incentive over time. Additionally, if a company has excess R&D tax credits beyond what it can apply to income tax, those credits can be used to offset state payroll withholding taxes, providing another avenue for companies to benefit. This makes Georgia’s R&D tax credit a flexible and valuable tool for businesses investing in innovation.
Hawaii offers a Research Activities Tax Credit designed to support qualified high technology businesses (QHTBs) conducting R&D within the state. To qualify, a business must be registered in Hawaii, conduct at least 50% of its activities in qualified research, and have fewer than 500 employees. The credit is based on a percentage of the federal R&D tax credit (calculated using IRS Form 6765) and applies only to research expenses incurred in Hawaii.
To claim the credit, businesses must first receive certification from the Hawaii Department of Business, Economic Development & Tourism (DBEDT) and complete Form N-346 when filing their state tax return. The total amount of tax credits issued is capped at $5 million per year, and certification is granted on a first-come, first-served basis. The credit is available through December 31, 2029. Additionally, businesses must submit an annual survey to DBEDT as part of the eligibility requirements.
Idaho offers an R&D tax credit to encourage businesses to invest in research activities within the state. The credit is based on 5% of a company’s qualified research expenses (QREs) incurred in Idaho, following the definitions set by IRC § 41. Eligible expenses include wages, supplies, rental costs for computers, and a percentage of contract research expenses, as long as the research is conducted in Idaho. Both corporations and pass-through entities can claim the credit, but only corporations can apply for additional credits related to basic research payments.
The credit can be used to offset Idaho income tax and carried forward for up to 14 years if the business cannot use it all in a given year. Start-up companies can elect to be treated differently under the Idaho research credit rules, impacting how their fixed-base percentage is calculated. If a company is part of a unitary group, the credit may be shared among group members.
Illinois offers an R&D tax credit to businesses that increase their research spending within the state. The credit is 6.5% of qualifying research expenses (QREs) that exceed a base amount, following the federal IRC § 41 guidelines. This credit applies to businesses that are subject to Illinois income tax, including corporations, trusts, and exempt organizations filing a tax return. The credit is calculated using Schedule 1299-D, which must be submitted with the appropriate Illinois tax return (IL-1120, IL-1041, or IL-990-T).
One of the key benefits of Illinois' R&D credit is that unused credits can be carried forward for up to five years, allowing businesses to maximize their benefit over time. However, the credit is not refundable, meaning it can only be used to offset Illinois tax liability. Additionally, businesses operating as part of a unitary group must file a single Schedule 1299-D for all members. To qualify, businesses must increase their R&D spending in Illinois compared to previous years.
Indiana offers an R&D tax credit to encourage businesses to increase their research activities within the state. The credit is based on a percentage of qualified research expenses (QREs) incurred in Indiana, following IRC § 41 guidelines. Businesses can claim a 15% credit on the first $1 million of increased QREs over a base amount, and 10% on amounts exceeding $1 million. There is also an alternative calculation method available for the aerospace industry and companies with no prior Indiana QREs, which allows a 10% credit on QREs exceeding 50% of their three-year average. The credit applies to expenses such as wages for research staff, supplies used in R&D, and contract research costs.
A key advantage of Indiana’s R&D credit is that unused credits can be carried forward for up to 10 years to offset future state income tax liability. Additionally, Indiana provides a 100% sales tax exemption for qualified R&D equipment and property, reducing costs for companies investing in research infrastructure.
Iowa offers an R&D tax credit for businesses that engage in qualified research activities within the state, but eligibility is limited to specific industries. The credit is based on a percentage of qualified research expenses (QREs) following IRC § 41 guidelines. The base amount used for the credit calculation is determined by multiplying the fixed-base percentage by the business’s average annual gross receipts from the previous four years, but it cannot be less than 50% of the QREs for the current year. This clarification applies to all tax years, past and present.
To qualify, businesses must claim and be allowed the federal R&D tax credit and be engaged in industries such as manufacturing, life sciences, software engineering, or aviation & aerospace. Certain businesses—like agriculture, finance, real estate, and retail—are not eligible. Unused credits can be refunded or carried forward.
Kansas offers an R&D tax credit for businesses that invest in research and development activities within the state. To qualify, expenditures must be allowable under the federal R&D tax credit (IRC § 41), meaning they must be related to developing or improving products, processes, or technologies. This credit is designed to incentivize companies to increase their research efforts in Kansas.
For tax years before 2023, the credit is 6.5% of the increase in qualified research expenses over the average of the current and previous two years. However, starting in 2023, the credit increases to 10% of this difference. The credit is non-refundable, but any unused portion can be carried forward in 25% increments until fully utilized. A unique feature of Kansas' R&D credit is that starting in 2023, businesses without a current tax liability can transfer the full credit to another entity, allowing it to be claimed in the year of transfer. The credit can only be transferred once, and both the transferor and transferee must complete the required forms (K-260 for transfers and K-53 for the original credit).
Kentucky offers a Qualified Research Facility Tax Credit to encourage businesses to invest in research and development infrastructure within the state. This nonrefundable credit equals 5% of the qualified costs associated with constructing, remodeling, or equipping research facilities in Kentucky. To qualify, expenditures must relate to tangible, depreciable property used for qualified research under IRC § 41. This credit can be applied to Kentucky corporate income tax, individual income tax, and the Limited Liability Entity Tax (LLET).
Any unused credits can be carried forward for up to 10 years to offset future tax liability. To claim the credit, businesses must file Schedule QR with their income tax return each year the credit is applied. Pass-through entities can apply the credit to LLET and pass it through to members, partners, or shareholders via Kentucky Schedule K-1, while sole proprietors and corporations can apply the credit directly. Businesses must maintain documentation, including a list of tangible property purchased and placed into service, to support their claim.
Louisiana offers an R&D tax credit for businesses conducting research within the state, with credit amounts based on company size: 30% for businesses with fewer than 50 employees, 10% for 50-99 employees, and 5% for 100+ employees. Companies receiving SBIR or SBTT grants can claim a 30% credit on the award amount. The base amount for calculating the credit is 80% of the prior three years’ average QREs for businesses with 50+ employees and 50% for smaller businesses.
Unused credits can be carried forward for five years but are not transferable, except for SBIR/SBTT-related credits. To qualify, businesses must apply for credit certification from the Louisiana Department of Economic Development. Some businesses, like professional services firms and custom manufacturers without a pending or issued U.S. patent, are not eligible. Applications must be submitted within one year of the year expenses were incurred.
Maine offers an R&D tax credit for businesses conducting research within the state. The credit is calculated as 5% of qualified research expenses (QREs) exceeding the base amount plus 7.5% of basic research payments made to universities or research organizations. The base amount is the average QREs over the prior three years, and only research conducted in Maine qualifies.
The credit is nonrefundable, but unused credits can be carried forward for up to 15 years. Corporations can use the credit to offset up to 100% of the first $25,000 in tax liability plus 75% of any remaining tax liability. Pass-through entities can distribute the credit to their partners or shareholders. To claim the credit, businesses must submit Maine’s Research Expense Tax Credit Worksheet along with federal Form 6765.
Maryland offers an R&D tax credit for businesses that conduct qualified research and development (R&D) activities within the state. The credit equals 10% of eligible R&D expenses that exceed the Maryland Base Amount, following IRC § 41(b) definitions. The program has a $12 million annual cap, with $3.5 million reserved for small businesses, and a single business cannot receive more than $250,000 in credits per year.
To qualify, businesses must apply to the Maryland Department of Commerce by November 15th for expenses incurred in the previous year. Small businesses (net assets under $5 million) benefit from a refundable credit, meaning if their credit exceeds their tax liability, they can receive the difference as a refund. The credit is currently available through June 30, 2027, unless extended.
Massachusetts offers an R&D tax credit for corporations that incur qualified research expenses (QREs) within the state, closely following federal R&D credit guidelines. Eligible expenses include wages paid to employees, a portion of contractor wages, and research-related supply costs. To qualify, the research must be performed in Massachusetts and meet the federal definition under IRC § 41.
The credit cannot reduce a corporation’s tax liability below $456 and is limited to the first $25,000 of corporate excise due, plus 75% of any excise due beyond that amount. Unused credits can be carried forward for 15 years, while credits limited by the 75% rule can be carried forward indefinitely. This makes Massachusetts’ R&D credit a valuable long-term tax planning tool for businesses investing in innovation.
Michigan has reintroduced its R&D tax credit, effective January 1, 2025, to support businesses investing in research and development within the state. The credit is available to both large and small businesses, with different rates based on company size. Large businesses (250+ employees) can claim 3% of R&D expenses up to a base amount, and 10% on expenses exceeding that base, with a $2 million cap per year. Small businesses (fewer than 250 employees) receive a 3% credit on expenses up to a base amount and 15% on expenses above it, with an annual cap of $250,000. The program is designed to encourage innovation, support job growth, and leverage Michigan’s university research ecosystem.
Michigan’s R&D tax credit is refundable, meaning businesses can receive a refund if their credit exceeds their tax liability. The program is capped at $100 million per year, and if total claims exceed this amount, credits will be prorated among applicants. This makes the credit a valuable tool for businesses looking to offset research costs and reinvest in growth.
Minnesota offers an R&D tax credit for businesses that invest in qualified research activities within the state. The credit follows federal R&D credit guidelines, but expenses must be incurred in Minnesota. Eligible expenses include in-house research costs and contributions to qualified nonprofit organizations that support small, innovative businesses.
The credit equals 10% of the first $2 million in qualifying research expenses and 4% for expenses beyond that amount. It is nonrefundable, but unused credits can be carried forward for up to 15 years. Businesses structured as partnerships or S corporations can claim the credit if they exceed their Minnesota-based "base amount" as defined by federal R&D credit rules.
Nebraska offers an R&D tax credit to businesses conducting qualified research activities within the state. The credit equals 15% of the federal R&D credit for expenses incurred in Nebraska. However, for research performed on a college or university campus, the credit increases to 35% of the federal credit. Eligible businesses include corporations, LLCs, partnerships, sole proprietorships, and other private entities. To qualify, companies must verify the work eligibility of new employees through the E-Verify system.
The credit is refundable, meaning businesses can receive a cash refund if their credit exceeds their tax liability. Additionally, companies can use the credit to offset Nebraska income tax or claim a refund on state sales and use taxes paid on qualifying expenditures. If the credit is distributed to owners of a pass-through entity, it becomes nonrefundable and can only be applied to their Nebraska income tax liability.
New Hampshire offers an R&D tax credit for businesses conducting qualified research activities within the state. The credit is 10% of the increase in qualified R&D expenses over the base amount, following IRC § 41 definitions. The program has an annual cap of $7 million, with individual businesses limited to a maximum credit of $50,000 per year. Wages claimed for this credit cannot also be used for the Economic Revitalization Zone Tax Credit (ERZTC).
The credit is nonrefundable, but unused credits can be carried forward for up to five years to offset future tax liabilities. Businesses must apply through the New Hampshire Department of Revenue Administration to claim their share of the annual credit pool. Since the total amount available is capped, credits may be prorated among applicants if requests exceed the yearly limit.
New Jersey offers an R&D tax credit for businesses conducting qualified research activities within the state. The credit is fixed at 10% of eligible research expenses, following federal IRC § 41 guidelines. Businesses must use the same credit calculation method as they do for their federal R&D credit. The credit applies only to research performed in New Jersey, and combined group filers must follow federal consolidated control group rules for qualified research expenses.
The credit is nonrefundable, but unused credits can be carried forward for 7 or 15 years, depending on the business type. Small businesses may qualify to include payroll tax credits in their calculation. New Jersey also allows purchased credits from the Technology Business Tax Certificate Transfer Program to be claimed like earned credits.
New Mexico offers the Technology Jobs and Research & Development (R&D) Tax Credit to encourage small businesses to invest in research activities within the state. To qualify, a business must have 50 or fewer employees and no more than $5 million in qualified expenditures. The credit equals 5% of qualified R&D expenses but increases to 10% if the research is conducted in a rural area. Businesses can also claim an additional 5% credit if they increase in-state payroll by $75,000 for every $1 million in qualified R&D expenditures.
The credit can be used to offset gross receipts tax and 50% of withholding taxes for employees and owners (with up to 5% ownership). Unused credits can be carried forward for up to three years. If claimed, this credit cannot be combined with the investment credit or technology jobs tax credit for the same period.
New York offers a Life Sciences Research and Development (R&D) Tax Credit to support innovation in the life sciences sector. To qualify, a business must be certified by Empire State Development (ESD) as a qualified life sciences company, be a new business, and have incurred R&D expenses within New York State. Companies meeting these criteria receive a certificate of tax credit from ESD, which is required to claim the credit.
The credit amount is 15% of qualified R&D expenses for businesses with 10 or more employees and 20% for businesses with fewer than 10 employees. The credit is refundable, meaning businesses can receive a cash refund if their credit exceeds their tax liability. It is available for up to three consecutive years, with a maximum credit of $500,000 per year.
North Dakota offers an R&D tax credit for businesses conducting qualified research activities within the state. The credit is 25% of the first $100,000 in excess qualified research expenses (QREs) for the tax year, and 8% for expenses beyond that amount. Businesses can choose between the regular method or the alternative simplified method, which calculates the credit as 17.5% of the first $100,000 in excess QREs and 5.6% on amounts above that, based on a three-year average QRE. This election can be made annually and is binding for that tax year.
If the credit exceeds a business’s tax liability, unused credits can be carried back three years and forward up to 15 years. Additionally, certain small businesses that began conducting R&D in North Dakota after December 31, 2016, and are certified as a qualified R&D company, may sell or transfer up to $100,000 of unused credits to another taxpayer. To qualify, the company must be a primary sector business with less than $750,000 in annual revenue.
Ohio offers an R&D Investment Tax Credit for businesses conducting qualified research activities within the state. The credit is 7% of the net excess of total qualified research expenses (QREs) for the taxable year over the average QREs from the previous three years. Ohio follows the federal Alternative Simplified Credit (ASC) method, meaning businesses must use a three-year average QRE base period when calculating their credit.
The credit is nonrefundable and can be used to offset the Commercial Activity Tax (CAT). Any unused credit can be carried forward for up to seven years, allowing businesses to apply it to future tax liabilities. To qualify, businesses must ensure their QREs align with federal R&D definitions while meeting Ohio’s specific requirements.
Pennsylvania offers an R&D tax credit similar to the federal R&D credit, with some key differences. The state caps its total annual credit at $55 million, with $11 million reserved for small businesses. The credit rate is 10% of qualified research expenses (QREs) for most businesses and 20% for qualified small businesses. Pennsylvania also uses a modified Alternative Simplified Credit method and requires that all research activities take place within the state. The credit is available to businesses and individuals subject to Corporate Net Income Tax or Personal Income Tax and requires at least two years of R&D expenditures in Pennsylvania.
A unique feature of Pennsylvania’s R&D tax credit is that it can be sold or transferred, providing flexibility for businesses that may not have immediate tax liability. The credit is nonrefundable, but unused credits can be carried forward for up to 15 years. The application period opens August 1, with a deadline of September 15 for research expenses incurred in the previous taxable year. Businesses must be fully compliant with state tax obligations before claiming or selling the credit. Unlike some states, Pennsylvania's R&D tax credit does not have a sunset provision, meaning it is expected to continue indefinitely.
Rhode Island offers an R&D tax credit to businesses investing in research within the state. The credit is based on federal R&D credit rules but applies only to expenses incurred in Rhode Island. Businesses can claim 22.5% of the first $111,111 in qualified research expenses (QREs) and 16.9% on any amount above that. For expenses incurred before January 1, 1998, the credit rate is 5% of QREs over a base amount.
The credit can’t reduce a company’s tax liability below the minimum tax, but unused credits can be carried forward for up to seven years. If the business is a partnership, joint venture, or S corporation, the credit is shared among owners based on their income distribution. Businesses must also apply other investment tax credits first, as the R&D credit can only offset up to 50% of the remaining tax liability.
South Carolina offers an R&D tax credit for businesses that invest in qualified research activities within the state. The credit is 5% of qualified research expenses (QREs) incurred in South Carolina, following federal R&D credit guidelines. To qualify, businesses must already claim the federal R&D credit and have eligible expenses within the state.
The credit can’t exceed 50% of a company’s tax liability after applying all other tax credits. Unused credits can be carried forward for up to 10 years, allowing businesses to maximize their benefits over time. The credit can be applied to both income tax and corporate license fees.
Texas gives businesses two great options for saving on R&D expenses—either a sales tax exemption on certain purchases or a franchise tax credit based on research spending. You can choose one option per tax year, but you’re free to switch between them in future years. The sales tax exemption applies to depreciable tangible personal property used directly in R&D, while the franchise tax credit helps businesses lower their franchise tax liability based on qualified research expenses (QREs) in Texas.
If you go with the franchise tax credit, you’ll need to file a Long Form Franchise Tax Report with the necessary schedules. If you prefer the sales tax exemption, you’ll need to register with the Texas Comptroller’s office and file an Annual Information Report (AIR) by March 31 each year to keep your exemption active. Since the exemption isn’t permanent, failing to file the AIR can result in losing it.
Utah offers an R&D tax credit for businesses investing in qualified research activities within the state. The credit includes 5% of qualified research expenses (QREs) that exceed a base amount, 5% of certain payments made to qualified organizations for basic research, and 7.5% of QREs for the current tax year. The credit follows federal R&D guidelines, but expenses must be incurred within Utah to qualify.
Unused credits from the first two categories can be carried forward for up to 14 years, while the 7.5% credit for current-year QREs cannot be carried forward. Businesses do not need to submit a separate form for the credit but should keep all relevant records in case of an audit. Additionally, Utah previously allowed a credit for machinery and equipment used in R&D, which expired after 2010, but any unused credit from prior years can still be carried forward for up to 14 years.
Vermont offers an R&D tax credit for businesses that qualify for the federal R&D credit and have eligible research expenses in Vermont. The state credit is 27% of the federal R&D credit amount for the same taxable year. Businesses can apply this credit to personal income tax, business tax, or corporate income tax.
If the credit exceeds a business’s tax liability, unused credits can be carried forward for up to 10 years. Additionally, Vermont publishes a list of companies that claimed the credit for transparency. To take advantage of this incentive, businesses should ensure their R&D expenses align with federal guidelines and keep records for verification.
Virginia offers two R&D tax credits to encourage businesses to invest in research activities within the state: the refundable Minor R&D Tax Credit and the nonrefundable Major R&D Tax Credit. Thanks to recent legislative changes under House Bill 1518, businesses are seeing larger-than-expected tax benefits, with some applicants receiving awards exceeding previous caps. The application deadline for both credits is September 1, 2025, for research expenses incurred in 2024.
The Minor R&D Tax Credit is for businesses with $5 million or less in qualified research expenses (QREs) and provides 15% of the first $300,000 in QREs exceeding a base amount (or 20% if conducted with a Virginia college or university). The credit is refundable, meaning businesses can receive cash if the credit exceeds their tax liability. The Major R&D Tax Credit applies to businesses with over $5 million in QREs and offers 10% of the difference between current-year QREs and 50% of the average QREs from the prior three years. This credit is nonrefundable but can offset up to 75% of taxable income and be carried forward for 10 years. With increased credit availability, now is a great time for businesses to apply and take advantage of these expanded incentives.
Wisconsin offers a Research Credit to businesses investing in qualified research activities within the state, with multiple categories depending on the type of research. The general research credit is 5.75% of qualified research expenses (QREs) exceeding 50% of the average QREs from the previous three years. If a business had no QREs in the past three years, it can claim 2.875% of its total QREs for the tax year.
For businesses working on internal combustion engine research or energy-efficient product development, the credit rate doubles to 11.5% of QREs exceeding 50% of the prior three-year average. If no prior QREs exist, the rate is 5.75% of total QREs for the year. Up to 25% of the credit is refundable, meaning businesses could receive cash if the credit exceeds their tax liability. Unused credits can be carried forward for up to 25 years, allowing businesses to maximize long-term benefits.
Ari Salafia is CEO of TaxTaker. She's passionate about helping innovative companies and founders save millions on taxes through government incentive programs. Through her work at TaxTaker, Ari continues to inspire and empower businesses to maximize their savings potential.
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