The Ohio R&D tax credit, explained
Ohio's 7% R&D credit only offsets the Commercial Activity Tax, which most early-stage startups no longer owe.
Last verified July 2026 against Ohio Department of Taxation guidance.
The short answer
Ohio has an active state R&D tax credit, but it works differently than most states. Instead of reducing income tax, it offsets the Ohio Commercial Activity Tax, or CAT.
How the Ohio credit works
The credit equals 7% of qualified research spending above the average of the prior three calendar years. It is nonrefundable, and unused credit carries forward for 7 years against future CAT liability.
There is an important catch for startups. Ohio raised the CAT exclusion threshold to $6 million in taxable gross receipts. Most early-stage companies fall under that threshold and owe no CAT at all, which means they currently have no tax bill for this credit to offset. A bill in committee, House Bill 756, would extend a version of the credit to state income tax for smaller businesses, but it has not passed.
How it stacks with the federal credit
Ohio's credit is calculated using the same qualified research expenses as the federal credit, but it only helps once a company owes CAT.
Example: an Ohio manufacturing tech startup with 10 employees and an average salary of $108,000 spends $1,080,000 on qualified research. If its 3-year average base is $700,000, the excess is $380,000, worth a $26,600 Ohio credit at 7%. But if the company's Ohio gross receipts are under $6 million, it owes no CAT this year, so that $26,600 credit sits unused and carries forward until the company's receipts grow past the threshold. The federal credit is not affected by CAT status at all. The same $1,080,000 in spending generates a federal credit of roughly $65,000 to $108,000, and a company under $5 million in revenue can apply that federal credit against up to $500,000 of payroll taxes a year.
For most seed and early Series A startups, the practical state benefit today is small or zero, while the federal credit and its payroll tax offset apply regardless of CAT status. Track the Ohio credit for later, once gross receipts grow past $6 million.
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Eligibility and how to claim it
Any company subject to the Ohio Commercial Activity Tax that does qualified research in Ohio can claim this credit. There is no separate certification process.
The practical eligibility gate is the CAT itself. Since Ohio excludes the first $6 million of taxable gross receipts from CAT, a company below that level has no CAT liability and nothing for the credit to offset in the current year, even though it can still calculate and carry the credit forward.
Companies claim the credit on the CAT CS schedule filed with their Commercial Activity Tax return through the Ohio Department of Taxation. Claimship prepares the federal research study, which also supports the Ohio calculation. The company's CPA determines CAT liability and files both the CAT return and the federal Form 6765 package.
Official source: Ohio Department of Taxation.
Carryforward and deadlines
There is no separate application deadline for the Ohio R&D credit. It is calculated and claimed on the regular CAT return schedule, with unused credit carrying forward for 7 years.
Companies should still calculate the credit each year even if they expect no CAT liability, since the 7 year carryforward clock starts when the credit is earned, not when the company finally owes CAT.