Sign in
Talk to an expert

R&D TAX CREDIT CALCULATOR  ·  FOUR TAX YEARS

How much is your R&D tax credit worth?

The federal R&D tax credit is usually worth 6 to 10 percent of what a company spends on building and improving its products. A business with $600,000 of qualified spend in a year can expect a credit between $36,000 and $60,000. The calculator below estimates four tax years at once. No email required.

Four tax years at oncePast years includedNo email required

Run your numbersSee what counts

By Jordan Peck, CPA  ·  Reviewed by JP Mazzocco  ·  Last reviewed November 2026

EXAMPLE

QUALIFIED SPEND

$600,000

ESTIMATED CREDIT

$36,000 to $60,000

2023

Still open to claim

2024

Still open to claim

2025

Still open to claim

Tax year 1 of 4

Your 2023 numbers

Gross revenue for the year. A close estimate is fine, and a projection is fine for a year you haven't filed yet — enter 0 if you were pre-revenue.

$

Engineering and product salaries, contract developers, prototypes, testing, and cloud or compute costs. Enter 0 if there was none.

$

Rough numbers are fine — this is an estimate, not a filing.

How does this calculator work?

The calculator uses the Alternative Simplified Credit method set out in IRC Section 41(c)(5). It takes qualified research spend for each tax year, subtracts half of the average spend from the three years before it, and multiplies what is left by 14 percent. A company with no prior research spend gets 6 percent of the current year instead.

STEP 1

Find the base

Average the qualified spend from the three prior years, then cut it in half.

STEP 2

Take 14 percent

Subtract the base from this year's spend. Multiply the remainder by 14 percent.

STEP 3

Split the result

Part can offset payroll tax now. The rest carries forward against income tax.

A worked example, with the math shown

A software company spends $1,000,000 on engineering salaries and contract developers in 2026. It spent an average of $750,000 across 2023, 2024 and 2025. Here is how that turns into a credit.

Qualified research spend, 2026$1,000,000
Average qualified spend, 2023 to 2025$750,000
Base: half of that average$375,000
Spend above the base$625,000
Credit at 14 percent$87,500
After the reduced credit election under Section 280C$69,125

The last line is the one most calculators leave out. A company that takes the full deduction for the same costs has to reduce the credit. That gap is about $18,000 in this example.

Why does an AI assistant give a different number?

A general AI tool estimates the credit from average rates. It does not know a company's prior year spending, its payroll tax position, or whether it elected the reduced credit under Section 280C. Those three inputs move the final number by tens of thousands of dollars. An estimate is a starting point, not a filing position.

WHAT AI GIVES YOU

A ballpark built on a national average. Useful for deciding whether to look further.

WHAT A STUDY GIVES YOU

A number you can defend, with the projects, the people and the math documented behind it.

The deduction and the credit are two different things

Section 174A lets a company deduct domestic research costs in the year it spends them. Section 41 gives a tax credit worth a share of that same spend. A deduction lowers taxable income. A credit lowers tax owed, dollar for dollar. A company can use both on the same costs, with one adjustment.

 SECTION 174A DEDUCTIONSECTION 41 CREDIT
What it lowersTaxable incomeTax owed
Rough valueYour tax rate times the spend6 to 10 percent of the spend
Needs a studyNoYes, to support the claim
Taking bothAllowed. The credit is reduced under Section 280C, or the deduction is cut by the credit amount.
Your industry

See what qualifies as R&D in your industry

Over 1,000 businesses claimed credits last year for activities they were already doing. Select your industry to see examples.

Can a company with no tax bill use the credit?

A qualified small business can apply up to $500,000 of the credit against payroll taxes under IRC Section 41(h). The business needs less than $5 million in gross receipts for the year, and no gross receipts earlier than five years ago. Companies past that window carry the credit forward against future income tax.

This is the question that decides whether the number above is cash this year or a credit on the shelf. The calculator splits the two for you.

See what four years of your own numbers add up to.

Run your numbers

Common questions

Is this estimate a guarantee?

No. It is an estimate based on the two numbers you enter per year. A study looks at your projects, your payroll and your contracts, and usually changes the figure.

Do I need a study to claim the credit?

You need documentation that ties your spend to qualifying work. A study is how that documentation gets built and reviewed before filing.

Does my CPA still file the return?

Yes. Arvo builds the study and hands your CPA the completed Form 6765 and the support behind it. Your filing relationship does not change.

Does claiming the credit raise my audit risk?

The credit is a standard part of the tax code used by companies of every size. What draws questions is a claim with thin documentation behind it.

What happens after I book a call?

A tax specialist walks through your projects and your payroll, tells you whether the work qualifies, and gives you a range before you commit to anything.

Jordan Peck, CPA

Tax Solutions Manager at Arvo Tech. Reviewed by John Patrick (JP) Mazzocco, Associate Director, Tax Operations. Last reviewed November 2026.

Get a number you can defend

A short call with an R&D tax specialist. They will tell you what qualifies and what it is likely worth.

Talk to an R&D expert

No obligation.