Ohio R&D Tax Credit

Research and development activities can be a substantial expense for companies, especially those working to bring new products or services to market. However, there are a variety of tax credits that may be available to offset such costs. The Ohio R&D Tax Credit is one such opportunity.

Ohio Research and Development Tax Credit Explained

The state offers an incentive you can use to reduce the Commercial Activity Tax (CAT) called the Ohio research tax credit. To apply, you must invest in QREs, which are the same as QREs for the federal tax credit (described in IRC § 41). Costs that qualify can be both internal (like supplies and salaries) and related to third-party contracts. Furthermore, qualifying research must be technological in nature, focus on the experimentation process or elimination of uncertainty, and result in new or better products, software, or processes.

Ohio research and development tax credit is equivalent to 7% of the excess of your investment in QREs for the previous three tax years. You can carry forward any unused credit for a maximum of seven years if you don’t use it for the taxable year you received it.

Another big advantage is that this incentive does not have a complicated application and approval procedure.

How to Calculate the Ohio R&D Credit

The Ohio R&D tax credit is equivalent to 7% of the QREs above the average expenditures for the past three tax years.

Ohio Research and Development Tax Credit: Takeaway

Ohio offers a nonrefundable R&D tax credit you can use to offset CAT. The federal and state definitions of QREs are basically the same, and there are no complicated procedures or approval processes.

FAQs

What kind of companies can apply for an R&D tax credit in Ohio?

Partnerships, LLCs, S-Corporations, C-Corporations

What is the deadline for applying for an R&D tax credit in Ohio?

You must submit your application with the Ohio Tax Return.

What data do I need to calculate credit an R&D tax credit in Ohio?

Claim period QREs (Qualified R&D Expenses)

What information do I need to provide to file an R&D tax credit in Ohio?

QREs for the past three years.

Is credit carryforward an option in Ohio?

Yes, up to seven years.