R&D tax credit calculator
Your 2026 R&D credit
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Fill in steps 1 to 3 to see your credit.
How you can use it:
How the R&D tax credit is calculated
Most startups work out the federal R&D tax credit with the alternative simplified credit (ASC): 14% of this year's qualified research expenses above half their average over the previous three years. If you had no qualified expenses in any one of those three years, the credit is 6% of this year's instead (26 U.S.C. § 41(c)(4)). Spend the same every year and it works out to about 7%.
You don't need a profit to get the money. A qualified small business can apply up to $500,000 of the credit a year against its payroll taxes (IRS: payroll tax credit for small businesses), so it comes back as a smaller payroll tax bill every quarter. Finta's R&D tax credit guide walks through the claim.
What counts as a qualified research expense
- Wages. W-2 pay for people doing the research, directly supervising it or directly supporting it, in proportion to their time. Anyone who spends 80% or more of their time on it counts in full (Treas. Reg. § 1.41-2(d)(2)).
- Contractors. 65% of what you pay US contractors for the research.
- Supplies and cloud. Materials used up in the research, and cloud computing you use to develop and test. Hosting for your live product doesn't count.
- Not included. Anything done outside the US, rent, equipment, and routine work after commercial production. New improvements can still qualify if they pass the research tests.
The work itself has to pass a four-part test. It aims at a new or better function, performance, reliability or quality. It relies on engineering, computer science or another hard science. You started out unsure how to build it. And you worked it out by trying alternatives. Building new product features usually passes. Support, user research and marketing don't.
The alternative simplified credit, worked through
A company with $640,000 of qualified research expenses in 2026 and $1,080,000 across 2023 to 2025, on Form 6765 Section B:
| Form 6765 line | Amount |
|---|---|
| Line 20: 2026 qualified research expenses | $640,000 |
| Line 21: 2023 to 2025 qualified research expenses | $1,080,000 |
| Line 22: line 21 ÷ 6, half the three-year average | $180,000 |
| Line 23: line 20 minus line 22 | $460,000 |
| Line 24: line 23 × 14% | $64,400 |
Elect the reduced credit and line 26 is 79% of that: $50,876. A company filing its first claim, with no R&D in 2023, would skip lines 22 and 23 and take 6% of $640,000: $38,400.
Using the credit against payroll tax
You're a qualified small business for 2026 if your gross receipts for the year are under $5 million and you had none before 2022 (§ 41(h)(3)). Gross receipts include interest, so a company that earned interest on its bank balance in 2021 doesn't qualify, even with no sales.
- Elect it on Form 6765. Check line 33a and enter up to $500,000 on line 34, on a timely original return, extensions included. Filers other than partnerships and S corporations must also apply the current-year general business credit carryforward limit on line 35. The allowed payroll credit is on line 36.
- Wait for the next quarter. The credit starts with the first quarter that begins after you file. File your 2026 return in March 2027 and it starts with April to June payroll.
- Claim it each quarter on Form 8974. Attach it to Form 941, using Form 6765 line 36. Each quarter it offsets the employer's 6.2% Social Security tax, up to $250,000 of credit, then the employer's 1.45% Medicare tax. Unused elected credit carries to the next quarter, rather than becoming an income tax credit.
You can make the payroll election for five years in total. Any credit above $500,000 stays an income tax credit, which carries forward up to 20 years.
Section 174 and the credit in 2026
Since 2025 you can again deduct US research costs in the year paid or incurred, under Section 174A from the One Big Beautiful Bill Act (26 U.S.C. § 174A). From 2022 to 2024 they had to be spread over five years. Research done outside the US is still spread over 15 years.
The credit and the deduction interact. Either you cut your Section 174A deduction by the credit, or you elect a reduced credit, 79% of the full amount, and keep the whole deduction (§ 280C(c)). A company with losses may prefer the full credit if it can use the credit sooner than the deduction. That reduces the loss available to carry forward; compare when each tax benefit can actually be used before electing.
For calendar-year taxpayers, an election lets you deduct the remaining capitalized US research costs from 2022 to 2024 entirely in 2025 or equally over 2025 and 2026. The special small-business election to expense those costs retroactively closed July 6, 2026; some refund deadlines were earlier.
What founders get wrong
- Using 14% on all of it. The 14% only applies to spending above half your three-year average. Spend the same every year and you net about 7%.
- Forgetting that interest counts. Interest is a gross receipt. Earning any in 2021 or earlier rules out the payroll credit for 2026.
- Missing the election. The payroll election has to be on a return filed by its due date, extensions included. A late amended return can't add it.
- Counting foreign contractors. Research done outside the US doesn't count, even when a US company pays for it.
- Counting production hosting. Only the cloud you use to develop and test counts, not the servers your customers use.
- Skipping the records. Keep a record of who worked on which project and what they were unsure about. For 2026, Form 6765 requires Section G, a list of those projects, unless you elect the payroll credit as a qualified small business or, on an original return, have both $1.5 million or less in qualified expenses and average annual gross receipts of $50 million or less over the previous three tax years. Apply the limits at the controlled-group level where required. Otherwise list projects covering at least 80% of qualified expenses, capped at 50 projects, and aggregate the rest.
Updated November 2026 for the 2026 tax year.
R&D tax credit FAQ
How is the R&D tax credit calculated?
Most startups use the alternative simplified credit: 14% of this year's qualified research expenses above half their average over the past three years, or 6% of this year's if any of those years had none. The regular credit, 20% of spending above a base set by your gross receipts history, rarely suits a young company.
How much is the R&D tax credit worth?
If any of the previous three years had no qualified spending, 6% of this year's qualified spending: $30,000 on $500,000. A company with qualified spending in all three years that spends the same every year gets 7%. With that history, the faster spending grows, the closer the credit gets to 14% of it. These are full credits before a Section 280C reduced-credit election.
Can a startup with no revenue or profit claim it?
Yes. With no income tax to cut, a qualified small business can elect up to $500,000 a year against the employer's share of payroll taxes. Unused elected payroll credit carries to later quarters; credit not elected for payroll can carry forward up to 20 years against income tax.
Who counts as a qualified small business?
A corporation or partnership with under $5 million in gross receipts for the year and no gross receipts in any year before the last five. For 2026 that means none before 2022. Interest counts as gross receipts.
How much of the R&D credit can I use against payroll tax?
Up to $500,000 a year, subject to the election limits. The Inflation Reduction Act raised it from $250,000 for tax years from 2023. Each quarter, it offsets the employer's 6.2% Social Security tax up to $250,000 of credit, then the employer's 1.45% Medicare tax. Anything unused carries to the next quarter, and you can elect it for five tax years in total.
When do I get the money?
From the first quarter that begins after you file the return. File your 2026 return by March 31, 2027 and it starts with April to June payroll. You claim it each quarter on Form 8974 with Form 941, and anything you can't use carries to the next quarter. Through a PEO it usually takes longer, because the PEO claims for all its customers together.
Which expenses qualify for the R&D credit?
US wages for people doing, supervising or directly supporting the research, 65% of what you pay US contractors for it, supplies used up in it, and cloud computing used to develop and test. Rent, equipment and anything done outside the US don't count.
Does the R&D credit reduce my Section 174A deduction?
Yes, by the amount of the credit, unless you elect the reduced credit: 79% of the full credit, and you keep your whole Section 174A deduction. You make that choice on Form 6765, Item A, on the original return.
Can I claim the R&D credit for past years?
Yes, on an amended return, generally within three years of filing the original. The payroll election has to be made by the original return's due date, though, so a late claim can only reduce income tax.
Do I need an R&D study?
You need records showing who worked on which projects, what they were unsure about and how they tested alternatives. Section G of Form 6765 becomes required for tax years beginning in 2026. You can skip it if you elect the payroll credit as a qualified small business, or, on an original return, have $1.5 million or less in qualified expenses and average annual gross receipts of $50 million or less for the previous three tax years. Apply the limits at the controlled-group level where required. Otherwise report the projects covering at least 80% of qualified expenses, capped at 50 projects, and aggregate the rest.
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Finta prepares your R&D credit claim with your tax return, for 10% of credits claimed, with a $500 minimum.
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