The Indiana R&D tax credit, explained
Indiana's R&D credit is worth 15% of the first $1 million in Indiana research spending growth, and 10% above that.
Last verified July 2026 against Indiana Department of Revenue guidance.
The short answer
Yes, Indiana has a state R&D tax credit, called the Research Expense Credit. It rewards growth in Indiana research spending, not the full amount spent.
How the Indiana credit works
The rate is 15% on the first $1 million of the increase in Indiana qualified research expenses over the company's base amount, and 10% on any increase beyond that.
The credit is nonrefundable, so it can only reduce Indiana tax owed, but unused amounts carry forward for 15 years, giving a growing company plenty of time to use it.
How it stacks with the federal credit
Indiana's credit works alongside the federal R&D credit, since both are built on the same core idea of rewarding qualified research spending, at different rates and against different tax bills.
The federal credit is worth roughly 6% to 10% of qualified spend, and a startup under $5 million in revenue can apply up to $500,000 of it against payroll taxes each year, which matters most before a company has real Indiana income tax due.
Example: a 7-person Indiana team with $560,000 in qualified salaries, up from $400,000 the prior year, could see a federal credit of roughly $39,000 to $56,000 on the full spend. The $160,000 increase in Indiana research spending could also generate a state credit of about $24,000 at the 15% rate, which sits ready to use as the company's Indiana tax liability grows.
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Eligibility and how to claim it
Indiana's credit is open to any business increasing qualified research spending done in Indiana, using the same federal definition of qualified research as a starting point, then comparing it to a base amount from prior years.
Companies calculate the credit on Schedule IT-20REC and attach it to the Indiana return, whether that is the corporate Form IT-20 or an individual return for owners of a pass-through entity. A copy of federal Form 6765 must also be attached.
For partnerships, S corporations, and LLCs, the credit is calculated at the entity level and passed through to owners on Schedule IN K-1. The company's CPA handles this calculation and the filing with the Indiana Department of Revenue.
Official source: Indiana Department of Revenue.
Carryforward and deadlines
Unused Indiana R&D credit carries forward for up to 15 years, after being applied against current-year tax along with the company's other available credits.
There is no separate application. Schedule IT-20REC is filed with the annual Indiana income tax return, on the same deadline as the return itself.