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R&D Tax Credit Calculator
Estimate your federal Section 41 credit in seconds, using the Alternative Simplified Credit method and the line items AI startups actually spend on — engineer wages, contractor research, and GPU compute used for experimentation.
Current-year qualified expenses
History & eligibility
Estimated federal credit
$65,820
Startup method: 6% of total QRE (no prior 3-year history).
- Total QRE
- $1,097,000
- Qualified wages
- $720,000
- Contractor QRE (65%)
- $117,000
- Compute + supplies
- $260,000
Payroll-tax offset available
- Against payroll tax
- $65,820
- Carried forward
- $0
capped at $500K/yr
offsets future income tax
Planning estimate only, not a filing position. An actual claim requires a study documenting QREs project by project. Funded client work, foreign research and inflated wage allocations are common disqualifiers — involve a CPA before you file.
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An activity qualifies under the four-part test when it aims to create a new or improved business component, faces genuine technical uncertainty at the outset, resolves that uncertainty through a process of experimentation, and relies on hard sciences such as engineering or computer science. Both successful and failed efforts can qualify; routine maintenance and cosmetic changes cannot.
Since tax year 2022, Section 174 requires R&D costs to be capitalized and amortized over five years (fifteen for foreign research), which created surprise tax bills across the startup market. The credit itself was untouched — and became more valuable as an offset against that larger taxable income.
Frequently asked questions
What is the R&D tax credit?
Section 41 is a federal credit rewarding US-based development of new or improved products, processes or software. Qualified small businesses can apply up to $500,000 per year against payroll taxes even with no income tax liability.
How much is it worth?
Under the Alternative Simplified Credit method the credit is 14% of qualified research expenses above 50% of the prior 3-year average QRE. First-time filers with no prior QRE history use a flat 6% of current-year QRE.
Does AI work qualify?
Most non-routine model development, training pipelines, evaluation harnesses, inference optimization and novel product engineering clears the four-part test. Routine maintenance, bug fixes, cosmetic UI changes and pure prompt tinkering generally do not.
Do GPU and cloud costs count?
Cloud and GPU compute used directly for qualified research can count as a rental/lease-of-computer QRE. Costs for hosting production workloads serving customers do not.
Can a pre-revenue startup use it?
Yes. A qualified small business — under $5M current-year gross receipts and no gross receipts more than five tax years ago — can elect the payroll offset and receive quarterly cash savings via Form 6765 and Form 8974.
What documentation is required?
Contemporaneous records: project descriptions, time tracking by employee and project, payroll records, contractor invoices and supply/compute purchase records tying each activity to the four-part test.