Research Activities Credit - How To Discuss

The Research Activities Credit allows businesses and eligible entities to offset funds invested in certain research-related expenses through a reduction in their federal taxes.

A federal tax credit available to individuals, organizations or corporations that incur qualified expenses during the course of increasing their research expenditures during the tax year. The credit is only available for activities that are experimental and are undertaken for the purpose of developing new or improved technology.

The Research Activities Credit was implemented in 1981 and was intended to act as an incentive for companies and other entities to increase their research and development. The credit is available to individuals, estates, trusts, organizations, partnerships and corporations that pay for qualified research expenses conducted in the United States. Expenses can include wages, supplies, and a significant portion of funds paid to a third party to conduct qualified research (65 to 75 percent, depending on the type of entity hired). Partnerships and S Corporations must complete and submit IRS Form 6765 Credit for Increasing Research Activities to claim this credit. Others may claim it directly on IRS Form 3800, General Business Credit, except in cases where an estate or trust has the option to allocate the credit to beneficiaries. To see if you qualify for this credit, consult the IRS web site or a licensed tax professional.