{
  "id": "rd-tax-credit",
  "version": "a60571211e2c",
  "status": "published",
  "name": "R&D Tax Credit Calculator",
  "question": "What is my R&D tax credit?",
  "summary": "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.",
  "category": "finance",
  "subcategory": "tax-and-pay",
  "url": "https://www.acalculator.org/finance/rd-tax-credit-calculator",
  "markdown": "https://www.acalculator.org/finance/rd-tax-credit-calculator.md",
  "kind": "function",
  "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%.",
  "assumptions": [
    "Federal research credit by the alternative simplified credit (Form 6765 Section B), not the regular credit; every amount is at most $1 trillion.",
    "All research is qualified research in the United States; contract research is paid to an ordinary contractor (65%), not a research consortium (75%) or a qualified small business, university or federal laboratory doing energy research (100%).",
    "Prior-year QREs are for full 12-month tax years. The payroll tax election for qualified small businesses, the general business credit limit and carryforwards are not included. An estimate, not tax advice."
  ],
  "inputs": {
    "$schema": "https://json-schema.org/draft/2020-12/schema",
    "type": "object",
    "properties": {
      "wages": {
        "title": "Research wages",
        "description": "Wages this year for employees doing, supervising or directly supporting qualified research (W-2 box 1 amounts).",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000000
      },
      "supplies": {
        "title": "Research supplies",
        "description": "Supplies used up in qualified research this year, not land, buildings or equipment you depreciate.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000000
      },
      "computers": {
        "title": "Computer rental (optional)",
        "description": "Amounts paid this year to use someone else’s computers off your premises for qualified research.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000000
      },
      "contract": {
        "title": "Contract research paid",
        "description": "Amounts paid this year to outside firms or people (not employees) for qualified research; 65% of it counts.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000000
      },
      "p1": {
        "title": "QREs last year",
        "description": "Total qualified research expenses in the tax year before this one.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000000
      },
      "p2": {
        "title": "QREs 2 years ago",
        "description": "Total qualified research expenses two tax years before this one.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000000
      },
      "p3": {
        "title": "QREs 3 years ago",
        "description": "Total qualified research expenses three tax years before this one.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000000
      },
      "reduced": {
        "title": "Elect the reduced credit (section 280C)",
        "description": "Check to take 79% of the credit and keep the full research expense deduction (Form 6765 line 26).",
        "type": "boolean"
      }
    }
  },
  "outputs": {
    "credit": {
      "label": "R&D tax credit",
      "description": "The ASC (Form 6765 line 25), or 79% of it with the reduced credit election (line 26).",
      "format": "money"
    },
    "qre": {
      "label": "QREs this year",
      "description": "Wages + supplies + computer rental + 65% of contract research (line 20).",
      "format": "money"
    },
    "average": {
      "label": "3-year average QREs",
      "description": "The QREs of the 3 preceding years ÷ 3 (shown when each of the 3 years has QREs).",
      "format": "money"
    },
    "base": {
      "label": "Base amount",
      "description": "50% of the 3-year average, the same as the 3-year total ÷ 6 (line 22).",
      "format": "money"
    },
    "excess": {
      "label": "QREs above the base",
      "description": "This year’s QREs − the base amount, not below $0 (line 23).",
      "format": "money"
    },
    "fullCredit": {
      "label": "Credit before the election",
      "description": "14% of the QREs above the base, or 6% of this year’s QREs when a prior year had none.",
      "format": "money"
    },
    "reducedCredit": {
      "label": "Credit with the 280C election",
      "description": "The credit before the election × 79%.",
      "format": "money"
    },
    "rule": {
      "label": "Rule used",
      "description": "Which ASC rule applies: 14% over the base, or 6% when a prior year had no QREs.",
      "format": "text"
    }
  },
  "defaultAnswer": {
    "inputs": {
      "wages": 400000,
      "supplies": 50000,
      "contract": 100000,
      "p1": 360000,
      "p2": 330000,
      "p3": 300000,
      "reduced": false
    },
    "outputs": {
      "credit": 49000,
      "qre": 515000,
      "average": 330000,
      "base": 165000,
      "excess": 350000,
      "fullCredit": 49000,
      "reducedCredit": 38710,
      "rule": "14% of the QREs above half the 3-year average"
    },
    "text": "With $515,000.00 of qualified research expenses this year, the R&D tax credit is $49,000.00."
  },
  "examples": [
    {
      "given": {
        "wages": 400000,
        "supplies": 50000,
        "contract": 100000,
        "p1": 360000,
        "p2": 330000,
        "p3": 300000
      },
      "expect": {
        "qre": 515000,
        "average": 330000,
        "base": 165000,
        "excess": 350000,
        "credit": 49000,
        "reducedCredit": 38710
      },
      "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; hand calculation in content.mdx; Python 3 check in docs/progress/WP-142/xcheck.py"
    },
    {
      "given": {
        "wages": 200000,
        "supplies": 20000,
        "contract": 0,
        "p1": 150000,
        "p2": 100000,
        "p3": 0
      },
      "expect": {
        "qre": 220000,
        "credit": 13200,
        "fullCredit": 13200,
        "reducedCredit": 10428
      },
      "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; hand calculation in content.mdx; Python 3 check in docs/progress/WP-142/xcheck.py"
    },
    {
      "given": {
        "wages": 250000,
        "supplies": 12500,
        "computers": 7500,
        "contract": 40000,
        "p1": 280000,
        "p2": 260000,
        "p3": 245000,
        "reduced": true
      },
      "expect": {
        "qre": 296000,
        "average": 261666.66666666666,
        "base": 130833.33333333333,
        "excess": 165166.66666666666,
        "fullCredit": 23123.333333333332,
        "credit": 18267.433333333334
      },
      "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%); hand calculation in content.mdx; Python 3 check in docs/progress/WP-142/xcheck.py"
    },
    {
      "given": {
        "wages": 100000,
        "supplies": 0,
        "contract": 0,
        "p1": 300000,
        "p2": 300000,
        "p3": 300000
      },
      "expect": {
        "base": 150000,
        "excess": 0,
        "credit": 0
      },
      "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); Python 3 check in docs/progress/WP-142/xcheck.py"
    }
  ],
  "sources": [
    "26 U.S.C. § 41, Legal Information Institute: (b)(1) and (b)(2) qualified research expenses (wages, supplies, computer use), (b)(3)(A) 65% of contract research, (c)(4) the alternative simplified credit (14% of QREs over 50% of the average QREs of the 3 preceding years; 6% when any of them had none). https://www.law.cornell.edu/uscode/text/26/41 (retrieved 2026-10-19)",
    "IRS, Instructions for Form 6765 (12/2025), Credit for Increasing Research Activities: Section B lines 20 and 21 (QREs this year and the 3 prior years), line 26 (the section 280C reduced credit is line 25 × 79%), the payroll tax election (up to $500,000), and contract research at 65%, 75% or 100%. https://www.irs.gov/instructions/i6765 (retrieved 2026-10-19)",
    "IRS, One, Big, Beautiful Bill provisions: domestic research or experimental expenditures (section 70302) are deductible for tax years beginning after December 31, 2024. https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions (retrieved 2026-10-19)"
  ],
  "related": [
    "section-179",
    "depreciation",
    "qbi-deduction",
    "income-tax"
  ],
  "changelog": []
}