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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Pennsylvania offers a Research and Development Tax Credit that allows companies conducting qualified research in the state to offset tax liability and, in some cases, even receive cash back. The credit can be claimed alongside the federal R&D credit for a combined benefit.
The Pennsylvania program allocates a set pool of credits each year, which are distributed among eligible applicants. The credit is equal to 10% of qualified research expenses (QREs) that exceed a base amount, or 20% for qualified small businesses (under $5 million in assets).
Qualified expenses generally include wages paid to Pennsylvania-based R&D employees, supplies used in qualified research, and 65% of contract research conducted within the state.
One unique feature of the Pennsylvania program is that small businesses may apply for a refundable credit, while larger companies can sell unused credits on the open market. This flexibility makes it valuable for both startups and established enterprises.
To claim the credit, businesses must file an application (Form REV-545) with the Pennsylvania Department of Revenue by September 15th each year. Awards are issued in December, and the credit can be applied to the current tax year or carried forward for up to 15 years.
📄 Pennsylvania Department of Revenue – R&D Tax Credit Overview
📄 Form REV-545 + Instructions (PDF)
It’s important to note that Pennsylvania’s annual allocation cap means credits are prorated if total applications exceed the statewide limit. Strategic planning and timely filing are critical to securing the maximum benefit. Our team helps ensure applications are filed correctly and documented to support both state and federal claims.
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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