R&D Tax Credits

Are state R&D tax credits available?

Yes, over 35 states offer R&D tax credits that can be claimed in addition to the federal credit. State programs vary in rates, qualifying expenses, and carryforward rules. TaxTaker analyzes both federal and applicable state credits as part of every engagement.

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Trusted by companies that have claimed over $100M in incentives.

Expanded Answer

Can a company claim both the federal and state research and development tax credit?

Yes. In addition to the federal R&D Tax Credit, most U.S. states offer their own R&D tax credit programs, which can be claimed on top of the federal credit.State credits vary by jurisdiction but often mirror the federal credit structure. They may offer:

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Additional percentage credits on qualifying in-state R&D expensesRefundable credits in certain states (meaning you can receive a cash refund even with no tax liability).

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Credits applicable against state income tax or, in some cases, payroll taxImportant note:

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R&D credits can generally be stacked with state programs. However, stacking with certain federal grants may reduce your federal credit amount, always consult a tax advisor to maximize total benefits. For a list of state tax incentive programs: https://www.irs.gov/businesses/small-businesses-self-employed/state-government-websites.

What Qualifies

Activities that commonly qualify

Developing new software features or platform capabilities

Improving performance, scalability, reliability, or security

Building internal tools or technical workflows that required experimentation

Testing different technical approaches to solve engineering challenges

What Does Not Qualify

Work that usually does not qualify

Routine bug fixes with no technical uncertainty

Visual-only updates or minor design changes

Marketing, sales, and customer support work

General maintenance that did not require experimentation

Work already solved through an off-the-shelf implementation

Example Case Study

Example of combining federal and state R&D tax credits

A company operating in California and Texas performs qualifying R&D activities in both states. In addition to claiming the federal R&D tax credit, it also applies for state-level credits where available.

By stacking these incentives, the company increases its total tax savings and improves the overall return on its development investment.

Quick takeaway

If your team had to work through technical uncertainty, there is a good chance the work deserves a closer look.

Common Industry Examples

Companies operating in multiple states with R&D activity

Businesses combining federal and state incentives

Firms with in-state engineering or development teams

Companies eligible for refundable state credits

Organizations maximizing total tax savings across jurisdictions

Curious if you are missing out on credits?

Start with a quick eligibility check. If it looks promising, we move to a light info request and one technical interview.

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