R&D Tax Credit Calculator

The Alternative Simplified Credit (ASC) = 14% × (current-year Qualified Research Expenses (QREs) − 50% of your average QREs over the prior 3 tax years). If you had no QREs in any of the prior 3 years, the credit is instead a flat 6% of current-year QREs.

Wages for employees directly performing, supervising, or supporting qualified research; supplies used in the research (not capital items); and 65% of contract research costs paid to a third party for research performed on your behalf. The research must meet the IRS's four-part test: permitted purpose, technological in nature, elimination of uncertainty, and a process of experimentation.

No — there's also the Regular Credit method, which uses a more complex fixed-base percentage tied to gross receipts and QREs from 1984-1988. ASC is simpler to calculate and is what most companies (especially newer ones without decades of historical data) use, which is why it's the method modeled here.

Yes — qualified small businesses (under $5 million in gross receipts, and no gross receipts more than 5 years ago) can elect to apply up to $500,000 of the R&D credit against their payroll taxes (Social Security and Medicare) instead of income tax, which is valuable for pre-revenue or early-stage companies with no income tax liability yet.

Up to $500,000 per year for qualified small businesses — if your calculated credit is below that, the full amount can be applied against payroll tax; if it's above, only the first $500,000 can be used this way, with any remainder instead carried forward against future income tax.