The Pennsylvania R&D tax credit, explained
Pennsylvania's R&D credit is a capped annual award, 10% to 20% of qualified spending, and it can be sold for cash.
Last verified July 2026 against Pennsylvania Department of Revenue guidance.
The short answer
Yes, but Pennsylvania runs its credit differently than most states. It is not a line you calculate and put on your return. Instead, companies apply each year for a share of a capped statewide pool, and the Department of Revenue reviews and awards credit based on the applications it receives.
How the Pennsylvania credit works
The standard rate is 10% of Pennsylvania qualified research expenses above a base amount, rising to 20% for qualified small businesses, defined as companies with net book value of assets under $5 million. The total annual pool is currently $60 million, with $12 million of that set aside specifically for qualified small businesses.
The credit is nonrefundable against Pennsylvania tax. What sets Pennsylvania apart is that an awarded credit can be sold or assigned to another company for cash through a separate Department of Community and Economic Development program, which is a real option for a startup that has no Pennsylvania tax liability to offset.
How it stacks with the federal credit
Pennsylvania's credit stacks with the federal R&D credit, worth roughly 6% to 10% of qualified spending. Startups under $5 million in revenue can apply up to $500,000 of the federal credit against payroll tax each year, and Pennsylvania's credit-sale option can add cash on top for companies that qualify for an award but have no tax bill to offset.
Consider a Philadelphia biotech startup with 11 employees and an average salary of $115,000, or about $1.265 million in wages. If the company qualifies as a small business and its research spending above the base amount comes to $400,000, the state's 20% small-business rate would produce an $80,000 award, assuming the application is approved and the small-business pool has room.
At a federal rate near 8%, the same $1.265 million in spending could produce about $101,000 in federal credit, most of it usable against payroll tax right away. If the Pennsylvania startup has little state tax liability, it can sell its $80,000 award to another company for cash instead of waiting to use it. This is an example, and actual figures depend on the application, approval, and whether the annual small-business pool is fully subscribed.
Takes about 60 seconds. No signup.
Eligibility and how to claim it
Any business or individual performing qualified research in Pennsylvania can apply, but eligibility is not automatic the way it is with most states. Because the credit is a capped, competitive award, a company can meet every technical requirement and still receive a reduced amount if total approved applications exceed the $60 million pool for that year.
Companies apply through myPATH, the Department of Revenue's online portal, attaching federal Form 6765 or equivalent documentation along with Pennsylvania-specific project details. Once awarded, the credit offsets Corporate Net Income Tax or Personal Income Tax.
Claimship prepares the research study and documentation your myPATH application needs. Your CPA is the one who submits the application and, later, files the credit on your Pennsylvania return.
Official source: Pennsylvania Department of Revenue.
Carryforward and deadlines
Pennsylvania's application window runs from August 1 to December 1 each year. Companies have to submit inside that window to be considered for that year's award pool, and edits after submission are allowed only until 10 p.m. the same day.
Once awarded, unused credit carries forward up to 15 years, with no carryback. A company that cannot use its award can also sell or assign it, which is often faster than waiting out a 15-year carryforward.