What is the R&D tax credit?

The federal R&D tax credit (IRC Section 41) is a dollar-for-dollar credit that rewards U.S. companies for qualified research expenses such as employee wages, supplies, cloud computing for development, and contract research. Qualified small businesses can apply up to $500,000 per year against payroll taxes even before they are profitable.

How is the R&D tax credit calculated?

Two methods exist. The Alternative Simplified Credit (ASC) equals 14% of current-year qualified research expenses that exceed 50% of the average of the prior three years' expenses. The Regular Research Credit equals 20% of expenses above a base amount tied to gross receipts. Most companies elect the simpler ASC method.

Who qualifies for the R&D payroll tax offset?

A qualified small business with less than $5 million in gross receipts for the current year, and no gross receipts before the five-tax-year window ending with the current year, can elect to apply up to $500,000 of R&D credit per year against employer Social Security and Medicare taxes.

✦ Free R&D tax credit estimate · U.S. companies

How much R&D tax credit are you leaving behind?

Four inputs. One personalized number. See your estimated federal R&D credit — powered by IRS Form 6765 methodology — in 2 minutes.

2 minutesNo loginInstant estimate

SAMPLE ESTIMATE

Estimated Federal Credit

$27,650

For a company with $500K in qualifying R&D spend

R&D wages (W2 payroll)

$400,000

Supplies & cloud dev

$100,000

Contract research (65%)

eligible

✦ Your personalized number is 2 minutes away

The credit hides in plain sight

Most companies overlook the same three R&D costs.

This estimator models all three for your business, using numbers you can pull from memory or payroll in minutes. Part of our free business tools library.

Cost #1

Engineering & developer wages

The biggest piece for most companies. Every hour your team spends solving technical problems — building, testing, iterating — is likely qualifying payroll most businesses never claim.

Cost #2

Supplies & cloud dev

Prototyping materials and your U.S. cloud development environment — AWS, Azure, GCP compute used for R&D — count toward the credit and are routinely left off the form.

Cost #3

Contract research

Paid U.S. contractors doing qualified research count at 65% of what you paid them. Most companies don't realize outside help is creditable at all under IRC Section 41.

Simple process

From four numbers to your credit estimate.

01 · INPUT

Enter four numbers

Wages, supplies, cloud, and contractor spend. Pull them from payroll and your books — no documents to upload.

02 · CALCULATE

We run both methods

The estimator applies the IRS Form 6765 ASC and Regular Credit formulas, including the 280C election, instantly.

03 · REVEAL

See your number

Your estimated federal credit, gross and net — plus a clear breakdown of how it was calculated. Then talk to our advisory team to verify it.

By the numbers

14_%

of qualifying spend can come back as a federal credit under the simplified ASC method

$500_K

per year that qualified startups can apply against payroll taxes — even before they’re profitable

2_min

is all it takes to see your personalized federal R&D credit estimate with this free tool

Built on the same IRS Form 6765 methodology (ASC & Regular Credit) that R&D tax specialists apply — not industry averages or vendor guesses.

Built on real methodology

This estimator is a self-serve version of the diagnostic our advisors run with every client. It applies the same federal benchmarks — Section 41 qualified research expenses, the 65% contractor rule, and the 280C election — used in real R&D credit engagements, and produces a directional estimate in under two minutes.

See what the IRS may owe you.

Enter four numbers. Get your estimated federal R&D credit instantly.

2 minutesNo loginInstant estimate

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FY 2026

Your R&D Tax Credit Estimate

Federal credit estimate · Forms 6765 & 8974

Step 01

Qualified Research Expenditures

W2 Wages for R&D

U.S. employee payroll directly on R&D

Supplies

Consumable materials used in R&D

Cloud & Hosting

U.S. R&D cloud dev environment costs

Contract Research

U.S. contractors — 65% eligible

Current Period QRE$500,000

Step 02

Credit Calculation Method

Uses the average of prior 3 years’ QREs. No gross receipts history needed — the simpler, safer choice for most companies.

First Prior Year QRE

Second Prior Year QRE

Third Prior Year QRE

Average Prior Year QRE (3 yrs)$500,000

50% of Average Prior QRE$250,000

Excess QRE (Current − 50% Avg)$250,000

Uses gross receipts history & a fixed-base % (min 3%). Can yield higher credits for companies with strong revenue growth.

First Prior Year Gross Receipts

Second Prior Year Gross Receipts

Third Prior Year Gross Receipts

Fourth Prior Year Gross Receipts

Fixed Base % (statutory min 3%)3.00%

Avg Annual Gross Receipts × FBP$0

Eligible Excess QRE$250,000

Step 03

Your Estimated Credit

Apply 280C Addback Election

Reduces credit to 79% of gross — preserves your full R&D expense deduction. Recommended for most businesses.

ASC

Gross Credit · 14%

$35,000

Before 280C

ASC

Net Credit · After 280C

$27,650

79% of gross

Regular

Gross Credit · 20%

$50,000

Before 280C

Regular

Net Credit · After 280C

$39,500

79% of gross

Your ASC estimated credit

$27,650

Federal R&D tax credit · Tax year 2026

ASC · 14% rate

Eligible QRE $500,000
Excess QRE $250,000
Credit rate 14%
280C factor 79%

Informational estimate only — not tax, legal, or financial advice. Actual credits depend on your complete tax situation and qualifying activity analysis. Consult a qualified R&D tax professional before filing Form 6765.

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