active State Tax Credit

Ohio Research & Development Investment Tax Credit

Ohio Department of Taxation

7% of Ohio QRE (volume)

Visit official program ↗ Get early access to matching

The short version

Volume-based R&D credit — no base calc needed

Ohio's R&D Investment Tax Credit offers 7% of the taxpayer's qualified research expenses (volume-based, not incremental) against the Ohio Commercial Activity Tax (CAT) or franchise tax. Unlike most state R&D credits, Ohio's is volume-based — meaning the credit applies to all qualifying Ohio R&D spend, not just the increase over a base. Non-refundable with a 7-year carryforward. Available to any entity subject to CAT or franchise tax that conducts qualifying research in Ohio.

Funding type: Tax Credit
Level: State
Amount: 7% of Ohio-located qualified research expenses, applied against Ohio Commercial Activity Tax (CAT) liability (or franchise tax for entities still filing under that regime). Volume-based — the credit applies to the full Ohio QRE, not just the increment above a historical base. Non-refundable; unused credits carry forward 7 years.
Realistic amount: An Ohio software company with $500K in Ohio-located R&D wages generates $35,000 in Ohio R&D credit (7% × $500K). Volume-…
Deadline: Rolling — claimed on Ohio CAT annual return (CAT AR) or franchise tax return (Form FT-1120) for the applicable tax period
Status: active
States: OH
Payment model: tax offset

Who qualifies

Any entity subject to Ohio Commercial Activity Tax (CAT) or Ohio corporate franchise tax — includes C-corps, S-corps, LLCs, partnerships, and limited partnerships
Conducted qualified research activities within Ohio during the taxable period
Qualified research expenses must meet the federal IRC §41 definition (technological in nature, process of experimentation, qualified purpose)
Ohio QRE must be attributable to activities conducted within Ohio — multi-state companies must apportion R&D expenses to Ohio activity
No minimum revenue or employee threshold — available to startups and small businesses from day one

What it covers

Eligible expenses

Wages paid to Ohio employees directly conducting qualified research activities
65% of amounts paid to Ohio contractors for qualified research services
Supplies consumed during qualified research conducted in Ohio
Computer leasing costs directly attributable to Ohio qualified research

Ineligible expenses

Research funded by federal, state, or local government grants or contracts
Research conducted outside Ohio (must apportion expenses geographically)
Research in social sciences, arts, humanities, or management sciences
Routine product testing, quality control, or debugging that does not meet the §41 four-part test
Funded research where results ownership and financial risk rest with a third party

How to apply

1

Document Ohio-located QRE

Identify all qualified research expenses for activities conducted in Ohio: employee wages (W-2 employees working on qualifying research in Ohio), supply costs, and 65% of contract research paid to third parties for Ohio-sited work. Document each project with contemporaneous records showing technological uncertainty and process of experimentation.

~3 hrs
2

Apply 7% to total Ohio QRE

Multiply total Ohio QRE by 7% — no base amount subtraction required (volume-based). This is the current-year credit before any liability cap. If Ohio QRE is $400K, credit is $28,000. Keep a project-by-project log to support audit.

~3 hrs
3

Apply credit on CAT return (Form CAT-CR)

Report the R&D credit on Form CAT-CR (Credit Schedule) filed with your Ohio CAT annual return. Apply against Ohio CAT liability for the period. Any excess credit over current-period liability carries forward up to 7 years.

~3 hrs
4

Track carryforward on subsequent returns

If credit exceeds CAT liability in any year, carry forward the unused balance on Form CAT-CR in subsequent filings. The 7-year window begins from the year the credit was generated. No separate election is needed to preserve carryforward credits.

~3 hrs

Industry & certifications

NAICS codes: 541511, 541512, 541714, 541715, 325412, 336411, 334

Insider tip

Ohio's credit is volume-based — you get 7% of ALL Ohio R&D spend, not just the year-over-year increase. First-year companies and those with flat R&D budgets benefit equally with fast-growing ones.

Deadline & timing

No competitive application or pre-certification required. The credit is self-computed and claimed on the Ohio CAT annual return. Ohio CAT annual return is due May 10 of the following year for calendar-year filers (quarterly returns due 40 days after each quarter end). Carryforward credits are tracked on Form CAT-CR (Credit Schedule) in subsequent years. Ohio also operates a separate R&D Loan Fund (administered by Ohio Development Services Agency) for companies needing upfront capital — distinct from this tax credit.

Programs that stack well

Research & Development Tax Credit (Section 41)

Related programs

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.