What is my R&D tax credit?
Type this year's research wages, supplies and contract research, and the last 3 years of qualified research expenses. The R&D tax credit calculator works out the alternative simplified credit (ASC), the R&D tax credit calculation most small businesses use.
- R&D tax credit
- $49,000.00
With $515,000.00 of qualified research expenses this year, the R&D tax credit is $49,000.00.
- QREs this year
- $515,000.00
- 3-year average QREs
- $330,000.00
- Base amount
- $165,000.00
- QREs above the base
- $350,000.00
- Credit before the election
- $49,000.00
- Credit with the 280C election
- $38,710.00
- Rule used
- 14% of the QREs above half the 3-year average
R&D tax credit: $49,000.00. With $515,000.00 of qualified research expenses this year, the R&D tax credit is $49,000.00.
R&D tax credit by research wages
The results are estimates for information only. They are not financial, tax, or legal advice. Check the numbers with your lender or a qualified professional before you decide. Terms of use
How to calculate
Works out the federal research (R&D) tax credit by the alternative simplified credit on Form 6765: 14% of qualified research expenses above half the 3-year average, or 6% for a business with a year of none.
Example with the default inputs (Research wages $400,000.00, Research supplies $50,000.00, Contract research paid $100,000.00, QREs last year $360,000.00, QREs 2 years ago $330,000.00, QREs 3 years ago $300,000.00, Elect the reduced credit (section 280C) No): With $515,000.00 of qualified research expenses this year, the R&D tax credit is $49,000.00.
Method: QREs = wages + supplies + computer rental + 65% × contract research. If each of the 3 prior years had QREs: credit = 14% × (QREs − 50% × the 3-year average QREs), not below $0. If any of them had none: credit = 6% × QREs. With the section 280C election: credit × 79%.
- Federal research credit by the alternative simplified credit (Form 6765 Section B), not the regular credit; every amount is at most $1 trillion.
- All research is qualified research in the United States; contract research is paid to an ordinary contractor (65%), not a research consortium (75%) or a qualified small business, university or federal laboratory doing energy research (100%).
- Prior-year QREs are for full 12-month tax years. The payroll tax election for qualified small businesses, the general business credit limit and carryforwards are not included. An estimate, not tax advice.
Worked examples
Each example is checked against the calculator on every build.
- Research wages $400,000.00, Research supplies $50,000.00, Contract research paid $100,000.00, QREs last year $360,000.00, QREs 2 years ago $330,000.00, QREs 3 years ago $300,000.00 gives QREs this year $515,000.00, 3-year average QREs $330,000.00, Base amount $165,000.00, QREs above the base $350,000.00, R&D tax credit $49,000.00, Credit with the 280C election $38,710.00.Source: 26 U.S.C. 41(c)(4) (14% of QREs over 50% of the 3-year average; 6% with no QREs in any one of the 3 years) and 41(b)(3)(A) (65% of contract research), https://www.law.cornell.edu/uscode/text/26/41; IRS Instructions for Form 6765 (12/2025), Section B lines 20 to 26 (line 26: multiply by 79% for the section 280C election), https://www.irs.gov/instructions/i6765
- Research wages $200,000.00, Research supplies $20,000.00, Contract research paid $0.00, QREs last year $150,000.00, QREs 2 years ago $100,000.00, QREs 3 years ago $0.00 gives QREs this year $220,000.00, R&D tax credit $13,200.00, Credit before the election $13,200.00, Credit with the 280C election $10,428.00.Source: 26 U.S.C. 41(c)(4) (14% of QREs over 50% of the 3-year average; 6% with no QREs in any one of the 3 years) and 41(b)(3)(A) (65% of contract research), https://www.law.cornell.edu/uscode/text/26/41 (clause (B), 6% of QREs); IRS Instructions for Form 6765 (12/2025), Section B lines 20 to 26 (line 26: multiply by 79% for the section 280C election), https://www.irs.gov/instructions/i6765
- Research wages $250,000.00, Research supplies $12,500.00, Computer rental (optional) $7,500.00, Contract research paid $40,000.00, QREs last year $280,000.00, QREs 2 years ago $260,000.00, QREs 3 years ago $245,000.00, Elect the reduced credit (section 280C) yes gives QREs this year $296,000.00, 3-year average QREs $261,666.67, Base amount $130,833.33, QREs above the base $165,166.67, Credit before the election $23,123.33, R&D tax credit $18,267.43.Source: 26 U.S.C. 41(c)(4) (14% of QREs over 50% of the 3-year average; 6% with no QREs in any one of the 3 years) and 41(b)(3)(A) (65% of contract research), https://www.law.cornell.edu/uscode/text/26/41; IRS Instructions for Form 6765 (12/2025), Section B lines 20 to 26 (line 26: multiply by 79% for the section 280C election), https://www.irs.gov/instructions/i6765 (line 26: 79%)
- Research wages $100,000.00, Research supplies $0.00, Contract research paid $0.00, QREs last year $300,000.00, QREs 2 years ago $300,000.00, QREs 3 years ago $300,000.00 gives Base amount $150,000.00, QREs above the base $0.00, R&D tax credit $0.00.Source: 26 U.S.C. 41(c)(4) (14% of QREs over 50% of the 3-year average; 6% with no QREs in any one of the 3 years) and 41(b)(3)(A) (65% of contract research), https://www.law.cornell.edu/uscode/text/26/41 (only QREs above 50% of the average count)
How it works
The calculator follows Form 6765 Section B, the alternative simplified credit (ASC).
- QREs this year (line 20) = research wages + research supplies + computer rental + 65% × contract research paid. An empty computer box counts as $0.
- If each of the 3 prior years had QREs above $0:
- 3-year average = (QREs last year + 2 years ago + 3 years ago) ÷ 3.
- Base amount (line 22) = 50% × the 3-year average, which is the same as the 3-year total ÷ 6.
- QREs above the base (line 23) = QREs this year − the base amount, or $0 when that is below $0.
- Credit before the election (line 24) = 14% × the QREs above the base.
- If any one of the 3 prior years had $0 of QREs: credit before the election = 6% × QREs this year. The average, base and excess are not shown.
- Credit with the 280C election (line 26) = 79% × the credit before the election.
- R&D tax credit = the credit with the 280C election when you tick the election box, otherwise the credit before the election.
- Rule used is the text "14% of the QREs above half the 3-year average" or "6% of this year’s QREs: one of the 3 prior years had no QREs".
Exact arithmetic. Every amount is read as the exact decimal you typed, each step is an exact fraction (14% is 14/100, 65% is 65/100), and the results are rounded once to cents, half up. If any money result (the credit, QREs, average, base, excess, or either credit) is not $0 but too small to show as a number, there is no answer: 'A result is too small to show as a number: check the amounts.'
Figures that change each year
None of these figures is indexed for inflation; they change only when the law changes.
| Figure | 2026 value | Source | Next update |
|---|---|---|---|
| ASC rate | 14% | 26 U.S.C. 41(c)(4)(A) | Fixed by law |
| Base: share of the 3-year average | 50% | 26 U.S.C. 41(c)(4)(A) | Fixed by law |
| Rate with no QREs in a prior year | 6% | 26 U.S.C. 41(c)(4)(B) | Fixed by law |
| Contract research that counts | 65% | 26 U.S.C. 41(b)(3)(A) | Fixed by law |
| Reduced credit (280C election) | 79% | Form 6765 instructions (12/2025), line 26 | Changes only with the 21% corporate rate |
When the data is out of date
After April 15, 2027 the page keeps using these rules and says so above the result; check the next Form 6765 instructions.
Assumptions
- The alternative simplified credit only, not the regular credit (Section A). All research is qualified research in the United States.
- Contract research is paid to an ordinary contractor (65%), not a research consortium (75%) or a qualified small business, university or federal laboratory doing energy research (100%).
- The 3 prior years are full 12-month tax years. Every amount is between $0 and $1 trillion.
- The payroll tax election, the general business credit limit, controlled-group rules and credit carryforwards are not included. An estimate, not tax advice.
Worked examples by hand
$400,000 of wages, $50,000 of supplies, $100,000 of contract research; prior years $360,000, $330,000 and $300,000. QREs = 400,000 + 50,000 + 65% × 100,000 = $515,000. Average = 990,000 ÷ 3 = $330,000; base = 50% × 330,000 = $165,000; above the base = $350,000; credit = 14% × 350,000 = $49,000. With the 280C election: 79% × 49,000 = $38,710.
A business with no QREs 3 years ago. QREs = 200,000 + 20,000 = $220,000. One prior year had $0, so the credit is 6% × 220,000 = $13,200, or 79% × 13,200 = $10,428 with the election.
With computer rental and the 280C election. QREs = 250,000 + 12,500 + 7,500 + 65% × 40,000 = $296,000. Average = (280,000 + 260,000 + 245,000) ÷ 3 = $261,666.67; base = $130,833.33; above the base = $165,166.67; credit before the election = 14% × 165,166.67 = $23,123.33; with the election = 79% × 23,123.33 = $18,267.43.
QREs below the base. QREs = $100,000; average = $300,000; base = $150,000; nothing is above the base, so the credit is $0.
Other questions people ask
How do you calculate the R&D tax credit?
With the alternative simplified credit: add up this year's qualified research expenses (QREs), take half of the average QREs of the last 3 years, and claim 14% of the amount above it. $515,000 of QREs against a 3-year average of $330,000: 14% × (515,000 − 165,000) = $49,000.
What counts as a qualified research expense?
Wages for employees doing, directly supervising or directly supporting qualified research; supplies used up in it; amounts paid to use someone else's computers for it; and 65% of what you pay outside contractors for research (26 U.S.C. 41(b)). Land, buildings, depreciable equipment and overhead do not count.
What if I had no research expenses in one of the last 3 years?
Then the credit is 6% of this year's QREs, with no base amount (26 U.S.C. 41(c)(4)(B)). $220,000 of QREs gives a $13,200 credit.
What is the section 280C reduced credit election?
You can take 79% of the credit (Form 6765 line 26) and keep the full deduction for research expenses. Without the election you must reduce your research expense deduction by the full credit. The 79% is 100% minus the 21% corporate tax rate; the election is made on a timely filed original return.
Why is only 65% of contract research counted?
The law treats 65% of amounts paid to outside firms or people as QREs, because part of the price pays for their overhead and profit (26 U.S.C. 41(b)(3)(A)). Payments to a qualified research consortium count at 75%, and some energy research by small businesses, universities and federal laboratories at 100%; this calculator uses 65%.
Can a startup use the R&D credit against payroll taxes?
A qualified small business (gross receipts under $5 million and no receipts more than 5 years back) can elect to use up to $500,000 of the credit a year against its payroll taxes (Form 6765 and Form 8974). This calculator works out the credit itself, not that election.