State outline of Pennsylvania

Ohio offers an R&D tax credit with a structure unlike most other states. Rather than offsetting income tax, it offsets the Commercial Activity Tax, Ohio's gross receipts tax, which means businesses at many different profitability levels can benefit. For Ohio businesses already pursuing the federal R&D credit, the state credit stacks directly on top of the same qualifying expenses.

Contact Us

Ohio R&D Tax Incentives at a Glance

Ohio Research and Development Investment Tax Credit:

  • Credit based on the increase in qualified Ohio research expenses compared to a three-year average baseline
  • Available statewide with no geographic restrictions and no pre-approval required
  • Offsets Ohio Commercial Activity Tax (CAT) liability; non-refundable, with unused credit carried forward for up to seven year
  • Available to any business subject to the Ohio CAT that conducts qualifying research within the state
  • No cap on the credit amount that can be generated

Ohio R&D Sales Tax Exemption:

  • Machinery and equipment used primarily for research and development in Ohio are exempt from state and county sales tax
  • Applies to both direct research (developing new products or processes) and pure research (scientific or technical experimentation)
  • No separate application required; businesses complete an exemption certificate at the time of purchase

Federal Benefits:

  • Available for all qualifying U.S. research
  • Payroll tax offset option for eligible startups
  • Stackable with Ohio's state credit on the same qualifying expenses

Key Distinction:

Ohio's R&D credit offsets the Commercial Activity Tax, a gross receipts tax, rather than a traditional income tax. This means the credit can be valuable even for businesses that are not yet highly profitable, as long as they have CAT liability. Businesses with gross receipts below $6 million are generally exempt from the CAT and would not have CAT liability to offset. A separate but parallel credit is available for financial institutions under a different section of Ohio law.

Learn More

Who Qualifies for Ohio's R&D Tax Credit?

Business Subject to the CAT 

The credit is available to any business subject to Ohio's Commercial Activity Tax that conducts qualifying research within the state. The CAT applies broadly regardless of how a business is structured, so the key eligibility question is not entity type but whether your business has CAT liability. Businesses with gross receipts below the CAT threshold generally do not have tax liability to offset with the credit.

Ohio R&D tax credits

Research Activity

Qualifying research must be performed within Ohio. The state uses the federal definition of qualified research expenses, so if your work qualifies at the federal level, it will generally qualify for the Ohio credit as well, as long as the research was conducted in Ohio. Out-of-state research does not count, even if it qualifies for the federal credit.

Spending Increase

The credit is incremental, meaning it rewards businesses that are growing their research investment over time. Your current-year Ohio research expenses need to exceed your average spending from the prior three years. Businesses with little or no prior research history benefit from a lower baseline, which means more of their current spending generates a credit.

Federal Credit Eligibility

In most cases, businesses claiming the Ohio R&D credit are also eligible for the federal credit on the same qualifying expenses. Confirming federal eligibility before pursuing the Ohio credit is a good practice and helps ensure your state claim is well-supported.

What Research Activities Qualify in Ohio?

Ohio uses the same federal standards to define qualifying research, so the four-part test that applies at the federal level applies in Ohio as well. The key Ohio-specific requirement is that the research must be conducted within the state.

For businesses with research activity in multiple locations, that means tracking not just whether work qualifies, but where it happens. Only expenses tied to Ohio-based research count toward the state credit, making geographic allocation an important part of building a supportable claim.

What Expenses Qualify for Ohio's R&D Tax Credit?

Icon of a man holding a briefcase.

Wages and Salaries

Employees directly conducting, supervising, or supporting qualifying research performed in Ohio

Icon of a piece of paper with a pencil on top.

Supplies

Materials consumed during the research process in Ohio

Icon of a finger poking a ripple.

Contract Research

65% of amounts paid to third parties performing qualifying research in Ohio

Ohio uses the federal definition of qualified research expenses, limited to costs tied to research performed within the state. The 65% rate on contract research follows the same structure as the federal credit.

R&D Credits for Ohio Industries

How Qualifying Research Looks Across Ohio's Key Sectors

Automotive and EV Technology

Drivetrain systems, EV battery technology, powertrain components, and manufacturing process improvements for automotive assembly and supply chain operations

Aerospace and Defense

Hypersonic systems, propulsion development, additive manufacturing for aerospace components, autonomous aircraft systems, and advanced materials testing for flight and defense applications

Semiconductors and Advanced Electronics

New chip architecture, semiconductor fabrication process improvements, electronic component design, and integrated circuit system testing

Advanced Manufacturing and Materials

New production processes, materials performance improvements, defect reduction through systematic experimentation, and automation systems engineering across polymers, coatings, steel, glass, and specialty chemicals

Biohealth, Pharma, and Medical Devices

Drug formulation, medical device development, diagnostic tool engineering, clinical research instrumentation, and process development for pharmaceutical manufacturing

Software and Data Systems

Enterprise software, financial technology platforms, cybersecurity tools, logistics optimization systems, and data infrastructure developed through iterative technical development and testing

Food and Agriculture

Crop protection technologies, food processing and preservation methods, agricultural equipment engineering, and new cultivation techniques developed through systematic experimentation

Florida Claim Previous Credits

Federal R&D Tax Credit for Ohio Businesses

Ohio uses the same federal definition of qualifying research expenses, which means the documentation and analysis built for the federal credit largely supports the Ohio claim as well. The two credits can be claimed on the same qualifying Ohio expenses, capturing savings at both the state and federal level on the same research investment.

One planning note specific to Ohio: the state credit offsets the Commercial Activity Tax rather than income tax, which means it operates independently of your federal income tax position. Businesses that have years with lower income tax liability can still benefit from the Ohio credit as long as they have CAT liability. A tax advisor can help you think through how the two credits interact given your specific tax structure and how to sequence deductions and credits for the best combined outcome.

How to Claim Ohio's R&D Tax Credit

Step 1:

Track Qualifying Research Activity Throughout the Year

Ohio does not require pre-approval, but thorough documentation built during the year is essential to support the credit in the event of an audit. The Ohio Tax Commissioner has the authority to audit a representative sample of qualifying expenses, making contemporaneous records particularly important.

Step 2:

Calculate the Credit on the Appropriate Schedule

In most cases, businesses claiming the Ohio state credit will also qualify for the federal R&D credit on the same expenses. Confirming federal eligibility before preparing the state claim helps ensure both credits are properly supported and coordinated.

Step 3:

Claim the Credit on Your Quarterly CAT Return

The Ohio R&D credit is calculated on a calendar-year basis and claimed on your annual Commercial Activity Tax return. For businesses filing quarterly, this is effectively the fourth quarter return for the year in which the qualifying expenses were incurred. No separate application or certification is required. Unused credit carries forward for up to seven years against future CAT liability.

What Records Should You Keep?

Project-Level Descriptions:

Maintain descriptions of each qualifying research project, the technical questions being worked through, and the methods used to address them. Documentation should clearly connect specific activities to Ohio-based work.

Payroll and Time Records:

Keep payroll records and time-tracking data for employees involved in qualifying research. For businesses operating across multiple states, records showing where research activity occurred are essential.

Expense Records:

Retain receipts and invoices for supplies, along with contracts and payment records for any third-party research conducted in Ohio. Records should be kept for at least four years after the return is filed.

businessman or accountant working pointing graph discussion and analysis data charts and graphs and using a calculator to calculate numbers. Business finances and accounting concept

Estimate Your R&D Tax Credit in Minutes

Find out how much your innovative work could earn back in tax credits. Use our quick calculator to estimate your potential savings — no forms, no hassle.

CALCULATE YOUR CREDIT

Saving Money, Spurring Innovation

Every day, companies nationwide further the mission of innovation with new products, processes and initiatives that change the landscape of how we do business. But innovation takes funding, and with that comes a vicious cycle: You need money to grow your business and develop your products and services… but you also need to do those same things to bring money in.

That’s why R&D tax credits were established. Designed to encourage companies like yours to invest in the innovation, creation and improvement of products or processes, R&D tax credits can offset some of the costs associated with research and development — fueling growth and technological advancement.

Pitfalls Ohio Businesses Should Avoid

Assuming the credit applies to all businesses regardless of CAT status

Ohio's R&D credit offsets the Commercial Activity Tax. Businesses with gross receipts below the CAT threshold generally do not have CAT liability and therefore cannot use the credit. Understanding your CAT position is a necessary first step before pursuing the state credit.

Including out-of-state research expenses

Only research conducted in Ohio qualifies. Businesses with employees or contractors working across state lines need to allocate expenses carefully. Work done outside Ohio does not count toward the state credit, even if it qualifies for the federal credit.

Skipping federal eligibility confirmation

Ohio's state credit and the federal R&D credit are closely linked. Businesses that haven't evaluated federal eligibility may be missing a significant opportunity and could leave the state claim less well-supported. Confirming both together is the most efficient approach.

Not tracking the seven-year carryforward

Ohio's credit carries forward for seven years. Businesses that generate more credit than they can use in a given year should monitor carryforward balances and plan to apply them before the window closes. Credits not used within seven years are forfeited.

Can You Claim Credits for Previous Years in Ohio?

Ohio generally allows amended CAT returns for prior periods, which means businesses that conducted qualifying Ohio research in past years without claiming the credit may still have an opportunity to recover it. A tax advisor can help determine which years are still open and whether a lookback review makes sense.

The federal R&D credit is also available on amended returns for open tax years. For Ohio businesses that have been conducting qualifying research for years without claiming either credit, a combined state and federal review can identify significant value that has not yet been captured.

WA state R&D lookback window

Watch our latest videos to learn more!

Confused about whether you qualify or how the credits work? Our videos break it all down for you.

Claiming the R&D tax credit can provide significant tax savings, but proper documentation is key to ensuring compliance and maximizing your benefits. Without the right records, your claim could be denied or flagged for an IRS audit. In this video, we’ll cover best practices for R&D tax credit documentation, including: ✅ How to maintain detailed project records ✅ Tracking employee time on R&D activities ✅ Organizing financial records of qualifying expenses ✅ Documenting experiment results and decision-making A well-organized documentation system not only supports your R&D credit claim but also improves overall business operations. Don’t wait until tax season—stay prepared year-round! 💡 Need expert guidance? James Moore’s tax professionals can help ensure your records meet IRS standards and maximize your claim. Contact us today! 🔹 Subscribe for more tax-saving strategies! 🔹 Like & share this video to help others optimize their R&D tax credits! #RDTaxCredit #TaxSavings #ResearchAndDevelopment #RDDocumentation #TaxPlanning #IRSCompliance #SmallBusinessTax #StartupFunding #BusinessTaxes #CPAFirm #TaxCredits #BusinessGrowth #TaxTips #FinancialPlanning #IRSRecords #AuditPreparation #JamesMooreCPA #AccountingAdvice #MaximizeTaxCredits #RDFunding #IRS MORE R&D TAX CREDIT SERVICES TOPICS LIKE THIS ONE ************************************************************** 🏥 James Moore R&D Tax Credit Services: https://www.jmco.com/tax/r-and-d-tax-credit-services/ 👩‍⚕️ R&D Tax Credit Services Articles on JMCO.com: https://www.jmco.com/articles/research-and-development-tax-credits/ SOCIALIZE WITH US! *************************************************************** ⁠📹 YouTube: https://www.youtube.com/@JamesMooreAndCo 💼 LinkedIn: https://www.linkedin.com/company/james-moore-and-co 🖒 Facebook: https://www.facebook.com/JamesMooreAndCo 🐦 Twitter: https://twitter.com/JamesMooreAndCo
YouTube Video UExyQlhPa0JKMTM1a1NrRmVaQ1M2Z085a0FpTkpYRlBnNC4xMkVGQjNCMUM1N0RFNEUx
Unlock R&D tax credit savings and reduce your payroll tax liability! Did you know that eligible startups and small businesses can use the R&D tax credit to offset up to $500,000 in payroll taxes annually? If your business isn’t yet profitable, this can be a game-changer—helping you monetize tax credits sooner and improve cash flow. What qualifies? Activities like developing new or improving existing products, processes, or software may be eligible, along with associated costs such as wages, supplies, and contractor expenses. But the election must be made on originally filed tax returns, so timing is critical! At James Moore, we simplify the R&D tax credit process, ensuring you maximize benefits while staying compliant. Don't leave money on the table—reach out today to see how we can help you claim these valuable credits! #RDTaxCredit #PayrollTaxOffset #SmallBusinessTaxSavings #StartupTaxCredits #TaxIncentives #ResearchAndDevelopment #TaxPlanning #BusinessGrowth #StartupFunding #Innovation #TaxDeductions #IRS #AccountingTips #Entrepreneurship #TaxCredits #TaxStrategies #FinancialSuccess #TechStartup #Manufacturing #BusinessTaxPlanning #JamesMooreCPA MORE R&D TAX CREDIT SERVICES TOPICS LIKE THIS ONE ************************************************************** 🏥 James Moore R&D Tax Credit Services: https://www.jmco.com/tax/r-and-d-tax-credit-services/ 👩‍⚕️ R&D Tax Credit Services Articles on JMCO.com: https://www.jmco.com/articles/research-and-development-tax-credits/ SOCIALIZE WITH US! *************************************************************** ⁠📹 YouTube: https://www.youtube.com/@JamesMooreAndCo 💼 LinkedIn: https://www.linkedin.com/company/james-moore-and-co 🖒 Facebook: https://www.facebook.com/JamesMooreAndCo 🐦 Twitter: https://twitter.com/JamesMooreAndCo
YouTube Video UExyQlhPa0JKMTM1a1NrRmVaQ1M2Z085a0FpTkpYRlBnNC4wOTA3OTZBNzVEMTUzOTMy
Join R&D tax credit expert Lucia Valenzuela as she breaks down some of the biggest myths surrounding the R&D tax credit! Many believe it’s only for large corporations or tech giants, but in reality, businesses of all sizes and across various industries—like agriculture, manufacturing, and food & beverage—can qualify. Think you need a dedicated R&D department? Think again! Lucia explains why even smaller teams, including engineers and developers, often qualify for this valuable credit. And if you’re concerned about the complexity or IRS audits, she’s here to clear up the confusion and show you how, with the right guidance, claiming these credits can be straightforward. At James Moore, we make the R&D tax credit process simple, ensuring you maximize the benefits you’re entitled to. Don’t miss out on potential savings—let’s talk about how we can help! MORE R&D TAX CREDIT SERVICES TOPICS LIKE THIS ONE ************************************************************** 🏥 James Moore R&D Tax Credit Services: https://www.jmco.com/tax/r-and-d-tax-credit-services/ 👩‍⚕️ R&D Tax Credit Services Articles on JMCO.com: https://www.jmco.com/articles/research-and-development-tax-credits/ SOCIALIZE WITH US! *************************************************************** ⁠📹 YouTube: https://www.youtube.com/@JamesMooreAndCo 💼 LinkedIn: https://www.linkedin.com/company/james-moore-and-co 🖒 Facebook: https://www.facebook.com/JamesMooreAndCo 🐦 Twitter: https://twitter.com/JamesMooreAndCo
YouTube Video UExyQlhPa0JKMTM1a1NrRmVaQ1M2Z085a0FpTkpYRlBnNC41MjE1MkI0OTQ2QzJGNzNG
Unlock significant tax savings for your business with the R&D Tax Credit! 💰 Many business owners aren’t aware they may qualify for this valuable federal incentive, which is designed to encourage innovation. Whether you’re developing new products, processes, or software, the R&D tax credit offers a dollar-for-dollar reduction on eligible expenses, such as wages, supplies, and certain contract research costs. But how do you know if your activities qualify? The IRS uses a four-part test: 1. Permitted Purpose – Your project should improve or create a product, process, or technique. 2. Elimination of Uncertainty – Your work must tackle technical uncertainties. 3. Process of Experimentation – Testing and trial methods should be part of your process. 4. Technological in Nature – The project must rely on scientific principles, like engineering. From software companies optimizing applications to startups experimenting with autonomous technology, the R&D credit can support your innovative efforts—even if these innovations are new only to your business! Curious if you qualify? Contact James Moore’s R&D tax specialists today to see how we can help you document your efforts and maximize your credit. MORE R&D TAX CREDIT SERVICES TOPICS LIKE THIS ONE ************************************************************** 🏥 James Moore R&D Tax Credit Services: https://www.jmco.com/tax/r-and-d-tax-credit-services/ 👩‍⚕️ R&D Tax Credit Services Articles on JMCO.com: https://www.jmco.com/articles/research-and-development-tax-credits/ SOCIALIZE WITH US! *************************************************************** ⁠📹 YouTube: https://www.youtube.com/@JamesMooreAndCo 💼 LinkedIn: https://www.linkedin.com/company/james-moore-and-co 🖒 Facebook: https://www.facebook.com/JamesMooreAndCo 🐦 Twitter: https://twitter.com/JamesMooreAndCo
YouTube Video UExyQlhPa0JKMTM1a1NrRmVaQ1M2Z085a0FpTkpYRlBnNC4wMTcyMDhGQUE4NTIzM0Y5
Licensed tax attorney and Chief Innovation Officer Lucia Valenzuela explains how your business can benefit from valuable R&D tax credits. These government incentives reward innovation, helping you reinvest in your company's growth through product development, process improvements and more. With years of experience and a proven track record, Lucia and the James Moore team are here to simplify the process and maximize your credits. Discover how you can unlock these benefits and fuel your company's future! MORE R&D TAX CREDIT SERVICES TOPICS LIKE THIS ONE ************************************************************** 🏥 James Moore R&D Tax Credit Services: https://www.jmco.com/tax/r-and-d-tax-credit-services/ 👩‍⚕️ R&D Tax Credit Services Articles on JMCO.com: https://www.jmco.com/articles/research-and-development-tax-credits/ SOCIALIZE WITH US! *************************************************************** ⁠📹 YouTube: https://www.youtube.com/@JamesMooreAndCo 💼 LinkedIn: https://www.linkedin.com/company/james-moore-and-co 🖒 Facebook: https://www.facebook.com/JamesMooreAndCo 🐦 Twitter: https://twitter.com/JamesMooreAndCo
YouTube Video UExyQlhPa0JKMTM1a1NrRmVaQ1M2Z085a0FpTkpYRlBnNC4yODlGNEE0NkRGMEEzMEQy

Ready to Maximize Your Ohio R&D Tax Credits?

Ohio's R&D credit offers a meaningful state-level benefit that operates differently from most other state programs, offsetting gross receipts tax rather than income tax and carrying forward for up to seven years. Whether you are evaluating the credit for the first time, reviewing prior years for unclaimed credits, or looking to build a coordinated state and federal strategy, our team can help you identify what's available and make sure your claims are well-supported.

Frequently Asked Questions

Does my business have to be in a specific part of Ohio to qualify?

No. Ohio's R&D credit is available statewide with no geographic restrictions, zones, or special districts required. As long as your qualifying research is conducted within Ohio and your business has CAT liability, your location in the state does not affect eligibility.

How is the credit calculated?
Is the credit refundable?
Can I claim both the Ohio credit and the federal R&D credit?
What if my business has no CAT liability?
What if I have not claimed the credit in prior years?

Access the Latest Ohio R&D Tax Credit Information and Filing Requirements

Ohio Department of Taxation

Commercial Activity Tax Overview

Learn More

Ohio Revised Code Section 5751.51

R&D Investment Tax Credit

Download Form

JobsOhio

Incentives and Programs

Learn More

IRS Form 6765

Federal R&D credit form and instructions

Download Form

IRC Section 41

Federal law defining qualified research activities

View Statute

Need more information? Check out our thought leadership library.

Many businesses qualify for the R&D tax credit without realizing it. Learn what counts and how to claim it in 2026.

How the R&D Tax Credit for Businesses Turns Everyday Problem-Solving Into Tax Savings

The R&D tax credit for businesses is one of the most valuable dollar-for-dollar tax incentives…

Read Article
A worker wearing a yellow hard hat, safety glasses, and a plaid shirt inspects solar panels inside an industrial facility.

Manufacturing R&D Tax Credit: Are You Leaving Money on the Table?

Most manufacturers don’t think of their daily operations as research and development. That misunderstanding might…

Read Article
A person in business attire is working at a desk, using a calculator to review and fill out tax forms. Documents and a laptop are spread across the workspace, emphasizing a focus on financial calculations or tax-related tasks.

Payroll Tax Credit for R&D: A Strategic Option for Startups

For many businesses, especially startups, the traditional R&D tax credit is a valuable tool for…

Read Article
A business professional is using a calculator while taking notes in a binder filled with organized documents. The scene conveys a focus on tax preparation and tax credits.

How the R&D Tax Credit Carryforward (Unused Credits) Works for Businesses

What Does “Carryforward” Mean for R&D Tax Credits? Research & development (R&D) tax credits are…

Read Article
A group of tax professionals in business attire gather around a laptop, engaged in a focused discussion on R&D tax credits.

A Comprehensive Guide to Finding the Best R&D Tax Credit Provider

The research and development (R&D) tax credit can provide a significant financial benefit to businesses…

Read Article
A close-up of a calculator, pen, and glasses resting on a document labeled "Tax and Credits."

James Moore Announces New Research & Development (R&D) Tax Credit Services Line

James Moore & Company is proud to announce the launch of the firm’s Research and…

Read Article
Read Moore

Be the First to Hear.

Sign up for our newsletter and have it delivered to your inbox, so you don’t miss a thing.

Sign Up Now
Find us on Facebook Connect with us on LinkedIn Follow us on Instagram Find us on YouTube Follow us on Twitter
Professional headshot of Lucia Valenzuela.

Lucia Valenzuela

Chief Innovation Officer (CInO)

Lucia is the driving force behind the adoption of new technologies and services at our firm. She stays up to date on advancements and works with firm leadership to develop and implement strategic plans that align with our goal of enhancing the client and employee experience.

Lucia brings to James Moore a decade of experience and forward-thinking leadership in technology, public accounting and tax law matters. A trusted advisor in the field of R&D tax credits, she has successfully guided thousands of companies through the complexities of filing for that credit. Her other notable achievements include the market launch of revolutionary tax software and building a large specialty tax practice at a top 50 accounting firm.

Lucia’s knowledge of technology, strategic partnerships, teambuilding, public accounting and tax law provides our firm with a new and unique perspective on client service and operations. Outside of James Moore, Lucia is active in local bar associations and their respective boards. She also volunteers with Project Youth, Step-Up and other organizations focused on mentoring and empowering underprivileged youth in their journeys toward college.

Full Profile
Professional headshot of John VanDuzer

John VanDuzer, CPA

Partner

 Professional headshot of Kris Hutchins

Kris Hutchins, CPA

Client Service Director

This information serves general educational purposes and does not constitute tax, legal, or accounting advice. Ohio's R&D Investment Tax Credit program, including credit rates, CAT thresholds, eligibility requirements, and filing procedures, is subject to change by the Ohio General Assembly and Department of Taxation. The parallel credit available to financial institutions under ORC Section 5726.56 has different eligibility and calculation rules; financial institutions should consult a qualified tax professional for guidance specific to their situation. Federal R&D credit information reflects law as of February 2026. Consult qualified tax professionals before making decisions based on this information.

Last Updated: March 2026
Next Review: Quarterly or upon state or federal legislative or administrative changes