Are R&D Tax Credits Available in Ohio?

Yes. The state of Ohio provides the Research and Development (R&D) Tax Credit for tax years begin on or after January 1, 2008. The R&D Investment Tax Credit is nonrefundable against the Commercial Activity Tax ("CAT"). The state defines the Qualified Research Expenses ("QREs") the same as the federal with some difference as follows:

  • The credit amount is equal to 7% of the net excess of total investment in qualifying research expenses for the taxable year and the average investment of the previous three years' QREs.
  • Ohio follows Federal Alternative Simplified Calculation only which averages the prior three years of Qualified Research Expenditures as its base period.
  • The Ohio R&D Investment Tax Credit can be carried forward up to seven years.

Ohio R&D Tax Credit Case Study

An Ohio custom door and lock Company had never before claimed the R&D credit for the development activities employees. This project involved a four year study with a three year look back to claim credits.

The Company qualified for the federal R&D Tax Credits of $338,649 and an additional $64,859 in Ohio state R&D Investment Tax Credit.

FEDERAL
OHIO
Year
Total QREs
Credit
Total QREs
Credit
Year 4
$1,362,580
$88,568
$1,362,580
$28,651
Year 3
1,025,759
66,674
1,025,759
11,508
Year 2
965,404
96,540
965,404
13,476
Year 1
868,670
86,867
868,670
11,224
Total $4,222,413 $338,649 $4,222,413 $64,859

You can read more about this Ohio tax credit case study here.