The R&D Tax Credit is back! Find out how the Big Beautiful Bill Act can fund your R&D. Learn More
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Arizona provides a robust Research and Development Tax Credit designed to encourage companies to perform qualified research activities within the state. The credit can be claimed in addition to the federal R&D credit, offering a powerful opportunity to reduce both federal and state tax liability.
The Arizona credit is equal to 24% of the first $2.5 million in qualified research expenses (QREs) that exceed the base amount, plus 15% of expenses above $2.5 million. For tax years beginning after 2030, the rates are scheduled to adjust. Arizona’s definition of QREs largely follows the federal rules under IRC §41 but requires that the activities take place within the state and excludes certain expenses such as land, depreciable property, and overhead unrelated to research.
Arizona also offers a refundable R&D credit option for smaller businesses with fewer than 150 full-time employees worldwide, allowing them to receive a cash refund for a portion of the credit even if they have no tax liability.
To claim the credit, taxpayers must file Arizona Form 308, Credit for Increased Research Activities, along with their Arizona income tax return. A pre-approval application is required for the refundable portion, submitted through the Arizona Commerce Authority. Unused nonrefundable credits can be carried forward for up to 15 years.
📄 Arizona Department of Revenue – R&D Credit Overview
📄 Form 308 + Instructions (PDF)
It’s important to note that strategic planning is essential — especially for companies eligible for the refundable credit. Coordinating the timing and allocation of QREs between the federal and Arizona credits can maximize your overall benefit. Our team can help determine eligibility, prepare documentation, and file both the federal and state claims with audit-ready support.
Starting in tax year 2025, businesses can now immediately deduct domestic R&D expenses in the year they occur instead of spreading deductions over five years. The bill also offers refund opportunities for small businesses and faster deduction schedules for larger companies.
If your business has $31 million or less in annual gross receipts, you may be able to:
File amended returns for 2022–2024 to get cash refunds for previously capitalized R&D costs
Deduct remaining unamortized R&D expenses faster starting in 2025
Apply your R&D credit against payroll taxes—up to $500,000 per year for qualifying startups
Yes. Eligible small businesses can retroactively deduct R&D costs from 2022–2024 and claim refunds. Even larger companies can accelerate the deduction of past R&D costs over one or two years starting in 2025.
No. The 15-year amortization rule for foreign R&D remains in place. The new immediate expensing option only applies to U.S.-based research and development.
Savings vary, but many businesses may recover hundreds of thousands of dollars through a combination of:
Full expensing of domestic R&D costs
Retroactive refunds for 2022–2024
Annual R&D tax credits (often worth 5–10% of qualifying expenses)
Startups with less than $5 million in annual revenue can use the R&D credit to offset payroll taxes—up to $500,000 per year—resulting in quarterly cash refunds, even without taxable income.
Work with our expert team at TaxTaker. We help innovative companies like yours identify, document, and claim the maximum R&D tax credit available—while ensuring you stay fully compliant with IRS requirements. Our team specializes in both federal and state R&D tax credits, and we know how to uncover hidden value by reviewing past filings for potential refund opportunities. With the new 2025 rules in place, we’ll build a tailored strategy that maximizes your savings now and in the years ahead. That’s why businesses across the country trust TaxTaker to deliver results they can count on.
Working with TaxTaker is risk free. TaxTaker collects a success fee only if you qualify for a tax credit.
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