Overview
| Scheme | Credit for increasing research activities (Internal Revenue Code section 41) |
|---|---|
| Administered by | Internal Revenue Service (IRS) |
| Benefit type | Income tax credit |
| Rates | Regular credit of 20% of qualified research expenses above a base amount, or alternative simplified credit of 14%. Lower rates of 15.8% and 11.06% apply if the reduced credit is elected under section 280C(c). |
| Refundable | No. Qualified small businesses can elect to apply up to US$500,000 a year against payroll tax. |
| Pre-registration | None |
| How to claim | Form 6765, filed with the income tax return |
| Recent change | Section G business component information is required for tax years beginning after 2025, with some exceptions. |
Who can claim. Corporations, partnerships, S corporations, individuals, estates and trusts that pay or incur qualified research expenses can claim. Partnerships and S corporations pass the credit through to their partners and shareholders.
Eligibility
Research qualifies only if it passes all four parts of the test in section 41(d). The costs must be eligible to be treated as research or experimental expenditure under section 174. The work must be undertaken to discover information that is technological in nature. That information must be intended to be useful in developing a new or improved business component. And substantially all of the activities must be elements of a process of experimentation.
What is excluded
Research after commercial production begins, adapting or duplicating an existing business component, surveys and routine data collection, and research conducted outside the United States are among the exclusions.
Documentation
Keep records that link each business component to the four-part test and to the wages, supplies and contract research costs you claim. For tax years beginning after 2025, Section G of Form 6765 asks for information about each business component, with some exceptions.
Calculation and rates
| Item | Detail |
|---|---|
| Regular credit | 20% of qualified research expenses above a base amount |
| Alternative simplified credit | 14% of qualified research expenses above 50% of the average for the previous three years |
| Reduced credit election | 15.8% regular or 11.06% alternative simplified, under section 280C(c) |
| Contract research | 65% of amounts paid for qualified research performed for you |
| Payroll tax election | Qualified small businesses can apply up to US$500,000 a year against payroll tax, using Form 8974 |
How to claim
- Identify qualified researchTest each business component against the four-part test and record the result.
- Gather qualified research expensesWages, supplies and 65% of contract research costs, linked to the qualifying work.
- Choose a methodRegular credit or alternative simplified credit, and decide whether to elect the reduced credit under section 280C(c).
- Complete Form 6765Including Section G business component information where it applies.
- File with the returnAttach Form 6765 to the income tax return. Qualified small businesses make the payroll tax election on a timely filed original return, including extensions, then claim on Form 8974.
| Event | When |
|---|---|
| Registration | None |
| Claim | With the income tax return for the year, on Form 6765 |
| Payroll tax election | On a timely filed original return, including extensions |
Official sources
- Instructions for Form 6765, Credit for Increasing Research ActivitiesInternal Revenue Service
- About Form 6765Internal Revenue Service
- About Form 8974Internal Revenue Service
Educational content only, not tax advice. General information on the United States scheme, checked against the sources above on 1 October 2026. See the disclaimer.
Programs for United States
The four-part test, qualified research expenses, the regular and alternative simplified credits, Form 6765 and Section G, and the payroll tax election.
| Program | For | |
|---|---|---|
| R&D Tax Fundamentals The grounding every claimant needs, in any of the countries we cover: what research and development means for tax purposes, how a claim is built from project to filing, which records stand up to review, and how to work with an advisor from an informed position. | Companies & in-house finance teams | Register interest |
| Technical Teams Program For engineers, scientists and project leads whose work is the subject of a claim: why their input matters, how to identify uncertainty, record work as it happens and write the narrative. | Companies & in-house finance teams | Register interest |
| Startups and Scale-ups For founders and early finance hires: whether a claim is worth making, how to set up records from day one, how funding interacts with the incentive and what the first claim involves. | Companies & in-house finance teams | Register interest |
| In-House Finance Team Program For finance and tax teams that want to run R&D claims internally, or manage an external advisor from a position of knowledge: project identification workshops, time capture, cost allocation, the technical narrative, internal review and fee benchmarking. | Companies & in-house finance teams | Register interest |
| Advisor and Practitioner Program For accountants and advisors who prepare claims for clients: legislation and guidance, eligibility analysis, advanced calculations, technical interviews, reports, disputes, and ethics, integrity and fee arrangements. | Tax professionals | Register interest |
| Leadership Briefing: R&D Tax Relief for Executives A short, board-level overview for founders, directors and executives: what the incentive is worth to the business, the risks of a poorly prepared claim, how to govern the process, and what good advisors cost. | Companies & in-house finance teams | Register interest |