Indiana Research Expense Credit
Indiana Department of Revenue
15% / 10% incremental QRE
Tiered incremental R&D credit — new for 2024 tax years
Indiana's Research Expense Credit (IC 6-3.1-4) offers a tiered incremental credit against Indiana adjusted gross income (AGI) tax: 15% on the first $1 million of Indiana-apportioned qualified research expenses (QREs) above a base amount, and 10% on Indiana QRE above $1 million over base. Enacted via House Enrolled Act 1001 (2024), the credit applies to tax years beginning after December 31, 2023. It mirrors the federal IRC §41 definition of qualified research and uses the same base amount methodology (fixed-base percentage × average annual gross receipts for prior 4 years, minimum base 50% of current-year QRE). Non-refundable with a 10-year carryforward. Available to any taxpayer subject to Indiana AGI tax that conducts qualifying research with Indiana-apportioned expenses.
- Funding type
- Tax Credit
- Level
- State
- Amount
- 15% of Indiana-apportioned qualified research expenses above the base amount, up to $1 million in incremental QRE; 10% on Indiana incremental QRE exceeding $1 million. Applied against Indiana adjusted gross income tax. Non-refundable; unused credits carry forward for 10 years. Base amount computed using the same fixed-base-percentage methodology as the federal IRC §41 credit.
- Realistic amount
- An Indiana company with $800K in Indiana-apportioned incremental QRE (above its base amount) generates $120,000 in India…
- Deadline
- Rolling — claimed on Indiana income tax return for the applicable tax year
- Status
- active
- States
- IN
- Payment model
- tax offset
Who qualifies
- Any taxpayer subject to Indiana adjusted gross income (AGI) tax — includes C-corps, S-corps, LLCs, partnerships, and individuals conducting business in Indiana
- Conducted qualified research activities with expenses apportioned to Indiana during the tax year
- Qualified research expenses must meet the federal IRC §41 definition (technological in nature, process of experimentation, qualified purpose, not funded by another party)
- Indiana QRE must be apportioned to Indiana using the taxpayer's Indiana income apportionment factor
- Available for tax years beginning after December 31, 2023 — no credit for 2023 or prior tax years under this statute
- No minimum revenue or employee threshold
What it covers
Eligible expenses
- Wages paid to Indiana employees for time spent conducting qualified research activities (W-2 wages, apportioned to Indiana)
- 65% of amounts paid to Indiana contractors or out-of-state contractors for research conducted in Indiana (contract research expenses)
- Supplies consumed in the conduct of qualified research in Indiana
- Rental or lease costs of computers and equipment used directly and exclusively in Indiana qualified research
Ineligible expenses
- Research funded by grants, contracts, or otherwise by third parties — funded research disqualifies QRE
- Research conducted outside Indiana (must apportion to Indiana activity)
- Research in social sciences, arts, or humanities
- Routine testing, quality control, debugging, or surveys that do not meet the §41 four-part test
- Research after commercial production has begun (adaptation to existing systems)
- Management studies, efficiency surveys, market research — not technological in nature
How to apply
-
1
Document Indiana-apportioned QRE
Identify all qualified research expenses: employee wages for Indiana-based qualifying research employees, supply costs, and 65% of contract research amounts for Indiana-sited work. Apply Indiana's apportionment factor (typically a sales/receipts factor for Indiana's single-factor formula) to allocate total company QRE to Indiana activity. Maintain contemporaneous project-level records documenting technological uncertainty and process of experimentation.
~2 hrs
-
2
Compute the Indiana base amount
Calculate the base amount using the federal IRC §41 methodology: (fixed-base percentage × average annual gross receipts for the 4 preceding tax years). The fixed-base percentage is computed from QRE and gross receipts over the earliest 5 taxable years beginning after 1983 in which the taxpayer had QRE. Minimum base amount is 50% of current-year Indiana QRE. For startup companies using the alternative simplified credit (ASC) under IRC §41(c)(5), Indiana may permit that same methodology — confirm with Indiana DOR guidance or your tax advisor.
~2 hrs
-
3
Compute the tiered credit
Calculate Indiana incremental QRE = Indiana QRE minus Indiana base amount. Apply 15% to the first $1 million of Indiana incremental QRE, and 10% to Indiana incremental QRE exceeding $1 million. Sum the two tiers for total current-year credit. Example: $1.5M incremental QRE → (15% × $1M) + (10% × $500K) = $150K + $50K = $200K credit.
~2 hrs
-
4
Claim on Indiana income tax return
Report the Research Expense Credit on Form IT-40REC filed with your Indiana AGI tax return (IT-20 for corporations, or applicable individual/pass-through return). Apply against current-year Indiana AGI tax liability. Any excess credit over current-period liability carries forward up to 10 years. No separate pre-certification or advance approval is required.
~2 hrs
-
5
Track carryforward on subsequent returns
Maintain a carryforward schedule on Form IT-40REC in subsequent years. Credits are applied in order of generation (earliest first). The 10-year window runs from the tax year in which the credit was first earned. No separate election is needed to preserve carryforward credits.
~2 hrs
Industry & certifications
NAICS codes: 541511, 541512, 541714, 541715, 325412, 336411, 334
Indiana's 15% tier on the first $1M of incremental QRE is one of the highest R&D credit rates among US states. The tiered structure rewards mid-size R&D spenders especially — a $1M incremental year yields $150K vs only $100K under a flat 10% state.
Deadline & timing
No competitive application or pre-certification required. Self-assessed and claimed on the Indiana corporate income tax return (IT-20) or individual/pass-through return (IT-40). Carryforward credits are tracked on Form IT-40REC (Indiana Research Expense Credit schedule) in subsequent years. The credit is effective for tax years beginning after December 31, 2023 — first eligible returns are calendar-year 2024 returns filed in 2025.
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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.