R&D Tax Credits in California

California R&D Tax Credit

Yes, you can claim R&D tax credits in California. The state offers a research and development tax credit program known as the California Research Credit.


The Research and Development Tax Credit (R&D) is a tax credit designed to encourage businesses, regardless of their size, to engage in research and development within the United States. In California, this tax credit has a broad reach, extending beyond traditional scientists and research laboratories to encompass various industries and businesses. The California R&D tax credit serves as an incentive for companies to conduct research and development activities within the country. Over time, an increasing number of businesses have been taking advantage of this tax credit. Moreover, the Protecting Americans from Tax Hikes (PATH) Act of 2015 made the California R&D tax credits permanent and expanded the benefit to include startups as well.

What are the Potential Benefits of the Texas R&D Tax Credit?

The Texas R&D tax credits claimed by a qualifying company can potentially contribute to significant cost savings. These benefits include:

  • Federal and State Income Tax Reduction
  • Cash Flow Boost
  • Tax Relief
  • Retroactive Claims


In credits claimed
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Who Can Claim the California R&D Tax Credit?

The California R&D Tax Credit presents an enticing opportunity for companies engaged in qualifying research activities within the vibrant state. This initiative grants eligible companies the chance to claim the credit but with a slight twist. Unlike traditional tax credits, this one springs into action only after the budding business has flourished into a profitable venture.

Once the company crosses that crucial threshold, it unlocks the doors to this beneficial credit. By coupling innovation with profitability, California aims to reward and foster the growth of companies that have invested in research and development within its borders. This unique approach encourages entrepreneurial success and incentivizes forward-thinking enterprises to make California their home. The California R&D Tax Credit thus serves as a testament to the state's commitment to nurturing cutting-edge technology and advancing economic prosperity.

The activities that qualify for the California R&D tax credit are the same ones driving growth in your business.

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How Do I Claim the California R&D Tax Credit?

To claim the California R&D Tax Credit First, make sure you meet eligibility requirements and conduct research in California. Then, gather data on qualified research expenses and gross receipts. Use provided formulas to calculate the credit, considering both qualified research expenses and university-based research.

Submit FTB Form 3523 with your California tax return, including all necessary information and calculations. In certain cases, you can explore the alternative incremental credit method. Unused credits can be carried forward indefinitely, and don't forget the additional 1/3 credit for the 1.5% S-Corp entity tax.