What Is Form 6765 and How to Claim R&D Credits

Form 6765 is the IRS form a business attaches to its income tax return to claim the federal research and development tax credit, officially titled the Credit for Increasing Research Activities. The credit reduces your tax bill dollar-for-dollar based on qualifying research spending, and the form is where you identify those expenses, choose a calculation method, and make the elections that control how the credit interacts with the rest of your return. For 2026 filings, a new Section G adds detailed business-component reporting that most filers must complete.¹

Who Files Form 6765

C-corporations, S-corporations, partnerships, and sole proprietorships can all claim the research credit on Form 6765, provided the underlying work meets the eligibility test. The form is not a standalone filing. It attaches to Form 1120 for C-corporations, Form 1065 for partnerships, or Form 1120-S for S-corporations. Partnerships and S-corporations file Form 6765 to generate the credit, which then flows through to partners and shareholders on Schedule K-1. Individual owners receiving a research credit through a K-1 usually report it on Form 3800 (General Business Credit) with their Form 1040 rather than filing their own Form 6765.²

Filing deadlines follow the standard tax calendar. Partnerships and S-corporations file by March 15; C-corporations file by April 15. A six-month extension on Form 7004 extends the deadline for Form 6765 along with the rest of the return.³ Two important elections on the form (the Section 280C reduced credit and the payroll tax credit) require a timely filed original return, so missing the deadline can forfeit them for the year.

What Counts as Qualified Research

Not every project that sounds like R&D qualifies. Under Internal Revenue Code Section 41, research must satisfy a four-part test, and every prong has to be met.

Permitted purpose. The work aims to create or improve the function, performance, reliability, or quality of a product, process, software, technique, formula, or invention used in your business.
Elimination of uncertainty. At the outset, you face genuine uncertainty about whether you can achieve the result, the right design approach, or the appropriate method.
Process of experimentation. You evaluate alternatives through modeling, simulation, systematic trial and error, or similar methods. Building something without testing alternatives doesn’t count.
Technological in nature. The work relies fundamentally on principles of engineering, physical science, biological science, or computer science.

Fail one prong and the entire project drops off the form. The experimentation requirement catches a lot of claimants. Developing a new product on its own isn’t enough; you have to show the work involved evaluating different approaches to resolve a technical question.

Several categories of work are excluded outright, regardless of how innovative they feel. Research conducted after commercial production of a specific product has begun. Market research, consumer surveys, and promotional testing. Research in social sciences, arts, or humanities. Adapting an existing product to a particular customer’s specifications. Reverse-engineering or duplication from publicly available information. Routine testing, quality control, and efficiency studies. Research funded by someone else through a grant or contract. Research conducted outside the United States, Puerto Rico, or U.S. territories.⁴ Software developed primarily for internal use also faces an additional high-threshold-of-innovation test on top of the four-part test.

Which Expenses Go on the Form

Qualified research expenses (QREs) fall into three categories.

Employee wages are the largest category for most claimants. You can include wages paid to employees who directly perform qualified research, directly supervise it, or directly support it. The word “directly” matters. If a developer spends 70% of their time on qualifying projects and 30% on maintenance, only 70% of their wages count. Officer compensation follows the same allocation rule.²

Supplies are tangible items consumed or used in the research process: raw materials for prototypes, chemicals for experiments, components used in testing. The category is narrower than most people expect. Overhead, rent, ordinary utilities, telephone, travel, meals, license fees, and royalties are all excluded, along with land and depreciable property. Only “extraordinary utilities” can qualify, and only in limited circumstances.⁵

Contract research expenses are payments to third parties performing qualified research on your behalf. The general rule includes 65% of what you actually paid. Higher percentages apply in specific situations: 75% for payments to a qualified research consortium and 100% for certain energy research performed by eligible small businesses, universities, or federal laboratories.⁶

Choosing Between Section A and Section B

Form 6765 offers two ways to calculate the credit.

Section A: The Regular Credit

The regular credit uses a fixed-base percentage derived from your research spending and gross receipts during tax years after 1983 and before 1989. If your company existed and had both gross receipts and qualified research expenses during that window, you divide aggregate research expenses from those years by aggregate gross receipts. Start-up companies that first had gross receipts and research expenses after 1983 use a different formula with assigned percentages that ramp up over time.⁶ The regular credit can produce a larger benefit, but the historical data requirement makes it impractical for many businesses.

Section B: The Alternative Simplified Credit

Most filers use the alternative simplified credit (ASC). It equals 14% of the amount by which your current-year qualified research expenses exceed 50% of your average research expenses over the prior three years. If you had no research expenses in any of the prior three years, the credit is 6% of the current year’s expenses.² Once you elect the ASC for a tax year, you can’t switch to the regular credit for that year on an amended return.

The Section 280C Election

Claiming the research credit creates a tax interaction that first-time filers often miss. Under Section 280C, if you take the full credit, you must reduce your deduction for research expenses by the amount of the credit. You can’t get both the full deduction and the full credit for the same dollars.⁷

The alternative is to elect a reduced credit. Multiply your calculated credit by 79% (reflecting the 21% corporate tax rate) and take that smaller credit, but keep the full research expense deduction untouched. The election must be made on a timely filed original return, including extensions, and is irrevocable for that year.² Which approach produces a better result depends on your overall tax picture, so modeling both before filing is worth the effort.

The stakes here shifted for 2026. From 2022 through 2024, the Tax Cuts and Jobs Act required businesses to capitalize and amortize domestic research expenses over five years. The One Big Beautiful Bill Act created Section 174A, which permanently restores full and immediate expensing of domestic research and experimental expenditures for tax years beginning after December 31, 2024. Foreign research expenses still have to be capitalized and amortized over 15 years.⁸ With full expensing back, the 280C choice again affects real dollars in the year you file.

The Payroll Tax Election for Startups

A qualified small business can elect to apply up to $500,000 of the research credit against payroll taxes instead of income taxes. To qualify, the business must have gross receipts below $5 million for the tax year and must not have had any gross receipts in any year before the five-year period ending with the current tax year.⁹ That second requirement is the one people miss: the payroll tax election is designed for genuine startups, not just small companies. A business earning $3 million a year for a decade doesn’t qualify even though it’s well under the $5 million threshold.

Businesses making the election complete the relevant section of Form 6765 and attach it to their timely filed income tax return. They then file Form 8974 with their quarterly payroll tax return (usually Form 941) to actually apply the credit. The payroll tax credit first offsets the employer share of Social Security tax, up to $250,000 per quarter, with any remainder reducing the employer share of Medicare tax for that quarter.¹⁰ The advantage is cash value in each quarter you’re already paying payroll taxes, even if you owe no income tax.

New Section G Reporting Starting in 2026

For tax years beginning after 2025, Section G of Form 6765 becomes mandatory for most filers. It requires reporting qualified research expenses at the individual business component level. You must cover at least 80% of your total QREs across no more than 50 business components.¹¹ For each component, Section G asks for:

Identifying information: the EIN of the entity conducting the research, your principal business activity code, a name or identifier for the component, and the component type (product, process, or other).
Software classification, if applicable: internal use software, dual function software, non-internal-use software, or software excepted from the internal use rules.
Expense breakdown: wages split into three subcategories (actual conduct of research, direct supervision, and direct support), plus supply costs, computer rental or lease costs, and contract research expenses.

Two groups of filers are exempt from mandatory Section G reporting: qualified small businesses electing the reduced payroll tax credit, and taxpayers with total qualified research expenses of $1.5 million or less at the control group level who also have gross receipts of $50 million or less and are claiming the credit on an originally filed return. For those filers, Section G is optional.¹¹

If you’ve been claiming the credit without tracking expenses at the component level, put systems in place before the end of the 2026 tax year. Reconstructing the data afterward is where most compliance problems begin.

Documentation the IRS Expects

The research credit is one of the most frequently audited business tax benefits. Every dollar on Form 6765 needs to trace back to a specific technical challenge, a specific person working on it, and records created during the work rather than reconstructed later.

Strong documentation generally includes project descriptions identifying the technical uncertainty, time-tracking records showing which employees worked on qualifying activities and how many hours, payroll records tying wages to those employees, invoices and receipts for qualifying supplies, and contracts or payment records for third-party research. If an employee splits time between qualifying and non-qualifying work, you need a reasonable basis for the allocation percentage.

Section G’s new requirements largely mirror what the IRS already expected during audits. Companies that maintained component-level records for audit defense will find the transition manageable. Companies that calculated the credit using top-down estimates and broad allocation methods have significantly more preparation work ahead of them.

1
Internal Revenue Service. About Form 6765, Credit for Increasing Research Activities
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Internal Revenue Service. Instructions for Form 6765
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Internal Revenue Service. About Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns
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Office of the Law Revision Counsel. 26 U.S. Code 41 – Credit for Increasing Research Activities
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Internal Revenue Service. Audit Techniques Guide – Credit for Increasing Research Activities IRC 41 – Qualified Research Expenses
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Internal Revenue Service. Instructions for Form 6765 (Rev. December 2025)
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Federal Register. Election of Reduced Research Credit Under Section 280C(c)(3)
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Internal Revenue Service. Guidance on Amortization of Specified Research or Experimental Expenditures Under Section 174
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Internal Revenue Service. Qualified Small Business Payroll Tax Credit for Increasing Research Activities
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Internal Revenue Service. Publication 15 (2026), (Circular E), Employer’s Tax Guide
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Internal Revenue Service. IRS Extends the Period for Feedback on Form 6765