Delaware Research and Development Tax Credit
Delaware Division of Revenue
20% or 10% of incremental DE QRE
Fully refundable Delaware R&D credit — 20% for small businesses
Delaware provides a fully refundable income and corporate franchise tax credit for qualified research expenses (QRE) conducted within Delaware. Two-tier structure by business size: small businesses (average annual gross receipts ≤$20M) earn 20% of incremental Delaware QRE or 100% of the Delaware-apportioned federal §41 credit (whichever method is used); large businesses (gross receipts >$20M) earn 10% of incremental Delaware QRE or 50% of the Delaware-apportioned federal §41 credit. Unused credits carry forward 15 years. The credit is fully refundable under Delaware Code §2070(c) — excess over tax liability is paid as a cash refund.
- Funding type
- Tax Credit
- Level
- State
- Amount
- Two-tier credit by business size (based on average annual gross receipts): Small businesses (≤$20M): 20% of incremental Delaware-located QRE above the 3-year average, OR 100% of the Delaware-apportioned federal §41 credit. Large businesses (>$20M): 10% of incremental Delaware-located QRE, OR 50% of the Delaware-apportioned federal §41 credit. Fully refundable per Delaware Code §2070(c) — excess over income and franchise tax liability paid as a cash refund. Unused credits carry forward up to 15 years.
- Realistic amount
- A Wilmington fintech startup with $15M revenue and $2 million of incremental Delaware-located QRE earns $400,000 in Dela…
- Deadline
- Rolling — claimed annually on Delaware income tax return
- Status
- active
- States
- DE
- Payment model
- tax offset
Who qualifies
- Must conduct qualified research activities physically located within Delaware following federal IRC §41 four-part test
- Credit is incremental — applies only to Delaware-located QRE above the average of the 3 prior taxable years. New companies with fewer than 3 years of Delaware QRE history use a startup base calculation
- Two-tier rate by business size: small businesses (average annual gross receipts ≤$20M) earn 20% of incremental Delaware QRE or 100% of the apportioned federal §41 credit; large businesses (>$20M) earn 10% or 50% of the apportioned federal §41 credit
- Qualified research expenses include: wages of Delaware-based employees performing, supervising, or supporting research; supplies consumed in Delaware; 65% of Delaware contract research payments
- All Delaware income-tax-filing entities eligible: C-corporations, S-corporations, LLCs, partnerships, sole proprietors
- The credit may also be applied against Delaware corporate franchise tax — a significant advantage for corporations incorporated in Delaware that have substantial franchise tax obligations
- Credit is fully refundable per Delaware Code §2070(c) — excess credit over tax liability is paid as a cash refund. Unused credits also carry forward up to 15 years
- No minimum revenue, employee count, or project size requirements
What it covers
Eligible expenses
- Wages of Delaware-based employees directly performing qualified research activities
- Wages of Delaware-based employees directly supervising or supporting qualified research
- Supplies and materials consumed or destroyed in Delaware-located research
- 65% of payments to contractors for qualified research conducted in Delaware
- Computer rental for Delaware-located qualified research
Ineligible expenses
- Research conducted outside Delaware
- Research funded or reimbursed by a third party (government contracts, client-funded R&D)
- Social sciences, arts, humanities, cosmetic design changes
- Market research and consumer preference testing
- Research after commercial production begins
- Routine quality assurance and data collection without technological uncertainty
- Capital equipment purchases
- Delaware QRE below the 3-year average base
How to apply
-
1
Identify Delaware-located qualified research expenses
Calculate your QRE using federal IRC §41 definitions but limit to research physically conducted in Delaware. Wages for employees working in Delaware on qualified research, Delaware-location supply costs, and 65% of contractor payments for Delaware-conducted work qualify. Build project-level timesheets supporting your Delaware-specific QRE amount.
~6 hrs
-
2
Compute the 3-year average base and incremental QRE
Average your Delaware-located QRE from the 3 immediately preceding taxable years to establish the base. Subtract this average from current-year Delaware QRE — the positive difference is the incremental QRE on which the credit applies. Startups with fewer than 3 years of Delaware history use the startup base rules.
~3 hrs
-
3
Apply the tiered credit rates by business size
Determine your business size tier: ≤$20M average annual gross receipts (small business) or >$20M (large business). Small businesses: apply 20% to incremental Delaware QRE, or use 100% of the Delaware-apportioned federal §41 credit — whichever method is used. Large businesses: apply 10% to incremental Delaware QRE or use 50% of the Delaware-apportioned federal §41 credit. Sum the result to compute the total credit.
~1 hrs
-
4
Complete Delaware Form 2070
File Form 2070 (Research and Development Tax Credit) with your Delaware income tax return. The form documents QRE, the base calculation, incremental QRE, the tiered credit computation, and carryforward tracking. Attach to Form 1100 (C-corps), Form 700 (individuals/pass-throughs), or applicable return.
~3 hrs
-
5
Apply credit against Delaware income tax and franchise tax; claim refund
The credit offsets Delaware income tax liability and may also offset the Delaware corporate franchise tax. Because the credit is fully refundable per §2070(c), any credit amount exceeding combined income/franchise tax liability is paid as a cash refund — no carryforward required to realize full value. Unused portions carry forward up to 15 years for future use. Maintain a vintage-year schedule.
~2 hrs
-
6
Retain supporting documentation
Keep Delaware-specific QRE documentation: employee timesheets by project with Delaware location, supply invoices, contractor agreements. Retain for at least 3 years from the return due date. Delaware Division of Revenue audits align with federal §41 documentation standards.
~3 hrs
Delaware's credit is fully refundable — excess over tax liability is paid as a cash refund. That makes it far more valuable than a typical carryforward credit for pre-profit companies. It also offsets both corporate income tax AND franchise tax, so Delaware-incorporated companies with large franchise tax bills but minimal Delaware income benefit on two fronts. Model both tax types when sizing the benefit.
Deadline & timing
Claimed on Form 2070 (Research and Development Tax Credit) filed with the Delaware income tax return. Delaware corporate income tax returns are due the 15th day of the 4th month after fiscal year end (April 15 for calendar-year filers). Extensions available. Credit may also offset Delaware corporate franchise tax — a significant advantage for Delaware-incorporated companies with large franchise tax bills but modest Delaware income.
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Last reviewed 2026. GrantCompass is an independent funding-discovery tool and is not affiliated with any government agency. Always confirm details on the official program page.