The Minnesota R&D tax credit, explained
Minnesota's R&D credit pays 10% on qualified spend, and is now partially refundable for the first time starting in 2025.
Last verified July 2026 against Minnesota Department of Revenue guidance.
The short answer
Minnesota has an active state R&D tax credit for research done in Minnesota. It has existed for years, but a 2025 law made part of it refundable for the first time.
How the Minnesota credit works
The rate is 10% of qualified spending above a base amount, up to $2 million of that excess, then 4% on any amount above $2 million. There is no statewide cap and no application required.
For tax years after December 31, 2024, a company can elect to receive a cash refund on unused credit instead of just carrying it forward: 19.2% for 2025, and 25% for 2026 and 2027, subject to a $25 million annual statewide refund pool. Unused, unrefunded credit carries forward for 15 years. There is no carryback.
How it stacks with the federal credit
Minnesota's credit and the federal credit both start from qualified research spending, but only research physically performed in Minnesota counts toward the state credit.
Example: a Minnesota medtech startup with 11 engineers and an average salary of $114,000 spends $1,254,000 on qualified Minnesota research. If the base amount is $700,000, the excess is $554,000, all under the $2 million threshold, worth a $55,400 state credit at 10%. If the company has little or no Minnesota tax liability, it can elect to refund 25% of that unused credit in 2026, for about $13,850 in cash, and carry the rest forward for up to 15 years. The same $1,254,000 in spending can generate a federal credit of roughly $75,000 to $125,000, and a company under $5 million in revenue can apply that federal credit against up to $500,000 of payroll taxes a year.
Because the refund election is irrevocable once made on a timely filed return, companies should decide with their CPA each year whether cash now or a larger carryforward later makes more sense.
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Eligibility and how to claim it
Any company performing qualified research in Minnesota can claim this credit. There is no industry limit and no pre-approval needed.
All qualified research expenses must be for research conducted in Minnesota. Research done at an out-of-state office or by an out-of-state contractor does not count toward this credit, even if it counts federally.
Companies complete Schedule RD, Credit for Increasing Research Activities, and file it with their Minnesota return through the Department of Revenue. Partnerships and S corporations pass the credit through to owners on Schedule KPI or Schedule KS. Claimship prepares the research study, including which expenses were Minnesota-based. The company's CPA files Schedule RD and makes the refund election if it applies.
Official source: Minnesota Department of Revenue.
Carryforward and deadlines
There is no application deadline, since the credit is calculated and claimed directly on the annual return using Schedule RD. Unused, unrefunded credit carries forward for 15 years.
The refund election must be made on a timely filed original return, including extensions, and it is irrevocable for that year. Companies that miss the election on their original filing cannot add it later by amending.