Indiana R&D Tax Credit

Indiana R&D Tax Credit

Funds Indiana innovation activity through tax credits tied to qualifying innovation and workforce-linked growth.

Eligibility · United States · US-IN

The Indiana Research Expense Credit (REC) is a nonrefundable state income tax credit administered by the Indiana Department of Revenue (DOR) under IC 6-3.1-4. The credit is calculated at 15% of qualified research expenses (QREs) above the taxpayer's base-period amount, up to a $1 million ceiling; incremental QREs above that $1 million base-period threshold are credited at 10%. An alternative simplified calculation method is available for aerospace industry filers. QREs must meet the definition of IRC §41(b) and must be incurred in Indiana; eligible expense categories include in-house research wages and supplies as well as payments to contract research firms. The credit is claimed on Form IT-20REC filed with the annual Indiana tax return, with no pre-approval required from the DOR, and carries forward for up to 10 years under IC 6-3.1-4.

Eligibility extends to corporations, S-corporations, partnerships, LLCs, and LLPs with qualifying Indiana research activity. The program is sector-agnostic, making it available across industries — life sciences, advanced manufacturing, defense technology, software, and agri-tech among others — as long as the research meets the federal four-part test. There is no statutory aggregate cap on total program cost and no per-applicant ceiling beyond the mathematically computed credit amount. For companies with consistent Indiana R&D operations, credit values typically range from a few thousand dollars to $5 million per year, with the practical median for growth-stage companies in the $75,000 range based on program-wide data.

Because Indiana's REC is self-claimed with no application window, companies must maintain contemporaneous QRE documentation aligned with IRS and Indiana DOR audit standards. Indiana DOR audits in this area typically follow the federal IRC §41 examination playbook. Companies scaling R&D operations in Indiana — particularly those in the Indianapolis life sciences corridor or the aerospace defense supply chain — should assess credit eligibility on an annual basis, as incremental year-over-year QRE growth is what drives credit value. Stacking the Indiana REC with the federal R&D credit under IRC §41 is standard practice and does not trigger a double-benefit disallowance.