Short answer. You can claim both. Illinois runs its own credit equal to 6.5 percent of the increase in your Illinois research over a three-year base, separate from the federal Section 41 credit, so the same in-state work earns both. The Illinois credit is nonrefundable and carries forward five years, and it currently runs through tax years ending before January 1, 2032.
Key facts
| Claim both? | Yes, on the same Illinois research |
|---|---|
| Federal rate | 20% regular / 14% ASC |
| Illinois rate | 6.5% of the increase in Illinois research over a 3-year base |
| Illinois refundable? | No |
| Forms | Form 6765 (federal) + Schedule 1299 (Illinois) |
Two credits on the same research
Illinois computes its own incremental credit on Illinois expenses; the federal credit runs on your nationwide expenses.
The federal Section 41 credit is claimed on Form 6765 with your federal return. Illinois's credit is claimed on Schedule 1299 with your Illinois return, and the same research performed in Illinois can support both credits in the same year.
Illinois uses the federal definition of qualified research but applies its 6.5 percent rate to the increase in your Illinois research over the average of the prior three years, so the federal work is the basis for the state claim.
Federal Section 41 vs. Illinois, factor by factor
Illinois uses a simple three-year-average base and a single rate, applied only to in-state research.
| Factor | Federal Section 41 | Illinois |
|---|---|---|
| What it is | Credit for increasing research activities | Illinois research and development credit |
| Credit rate | 20% regular / 14% ASC | 6.5% of the increase over a 3-year average base |
| Refundable | No - a QSB may offset up to $500,000 of payroll tax under Section 41(h) | No |
| Carryforward | 20 years, with a 1-year carryback | 5 years, no carryback |
| Where research must occur | United States | Illinois only |
| How you claim it | Form 6765 with the federal return | Schedule 1299-D or 1299-A |
| Claim alongside the other? | Yes, on the same underlying QRE | Yes, on the same underlying QRE |
| Documentation | Four-part test and QRE substantiation (Treas. Reg. 1.41-4) | Uses the Section 41 definition, Illinois research only |
Where Illinois differs from federal
Three differences matter most when you claim both.
Rate and base. Illinois applies a single 6.5 percent rate to the increase in Illinois research over a simple three-year average, rather than the federal regular or ASC method. It is nonrefundable and offsets Illinois income tax only.
Scope and term. Only research conducted in Illinois counts, unused credit carries forward five years, and the credit currently runs through tax years ending before January 1, 2032. The federal credit has no in-state limit and a longer 20-year carryforward.
One evidence base for both
The records that prove the federal claim are what Illinois relies on too.
Because Illinois uses the federal definition of qualified research, the four-part test analysis and the wage, contractor, and supply records that substantiate your federal credit under Treas. Reg. 1.41-4 support the Illinois claim, limited to the in-state share. You build the evidence once and use it for both filings.
R&D Binder documents the federal Section 41 four-part test that both credits stand on, with Illinois handled as a state add-on from the same evidence. Whether your facts qualify, and which credits to claim, is a determination for your CPA.
More on Illinois's R&D credit
The full state overview, the federal Section 41 work it builds on, and related state guides:
Sources
Every claim on this page traces to a primary authority. Each source below is independent and verifiable.
- Illinois Public Act 103-0595 (research credit extension, 35 ILCS 5/201(k)) - Illinois General Assembly
- Illinois Schedule 1299-I, Income Tax Credits Information and Worksheets - Illinois Department of Revenue
- 26 U.S.C. § 41 (credit for increasing research activities) - Cornell Law School, Legal Information Institute
- IRS, About Form 6765 - Internal Revenue Service
- Treas. Reg. § 1.41-4 (recordkeeping and substantiation of qualified research) - Cornell Law School, Legal Information Institute
Get documentation built to survive an exam
R&D Binder produces the federal Section 41 binder and the Illinois state workpaper from one engagement, both built to survive an exam.