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R&D tax credit

A federal credit for research that develops or improves a product, a process or a piece of software. The IRS uses a four-part test to decide what counts.

Confirm anything about taxes with your own CPA or licensed tax advisor before you act.

Last updated: 2026-10-26

Who it is for

Businesses that design, build, test or improve something: a product, a process, a formula or software. Shops that build custom equipment or write their own scheduling and dispatch software sometimes fit.

How it works

  • The credit is figured on IRS Form 6765, Credit for Increasing Research Activities.
  • Each project is tested on its own against what the IRS calls the four-part test:
    1. The costs count as domestic research or experimental expenditures.
    2. The work aims to discover information that is technological in nature.
    3. That information is meant for a new or improved business component.
    4. Substantially all of the work is a process of experimentation.
  • A provider reviews projects and records against the test and prepares the support. Your CPA puts it on the return.
  • The credit is generally applied against income tax. A qualified small business can elect to apply part of it against payroll tax.

What to bring to the call

  • A short list of projects from the last few years, with what you were trying to solve.
  • Payroll records for the people who worked on them.
  • Contractor and supply invoices tied to those projects.
  • Your last two business tax returns, and your CPA’s name.

Where these facts come from

Questions owners ask

What counts as research for this credit?

Work that meets the IRS four-part test. The costs count as domestic research or experimental expenditures, the work seeks information that is technological in nature, that information is meant for a new or improved business component, and substantially all of the work is a process of experimentation.

Which form is the credit figured on?

IRS Form 6765, Credit for Increasing Research Activities.

Does the credit only count against income tax?

It is generally applied against income tax. A qualified small business can elect, on Form 6765, to apply part of it against payroll tax instead.

Who decides whether our work qualifies?

Your CPA or licensed tax advisor decides what goes on the return. A provider can review projects and records against the four-part test first.

What records matter most?

Records made while the work happened. Payroll for the people involved, project notes, test results and contractor invoices.

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