Short answer. Indiana's research credit is 15 percent of the increase in your Indiana research over a base, on the first $1 million of that increase, and 10 percent above $1 million. An alternative flat 10 percent method is available. The credit is non-refundable with a 10-year carryforward and no carryback.
Key facts
| Rate (first $1M of increase) | 15% of the increase in Indiana QRE |
|---|---|
| Rate (increase above $1M) | 10% |
| Alternative method | Flat 10% incremental, by election |
| Refundable | No (10-year carryforward, no carryback) |
| Form | Schedule IT-20REC |
15 percent, then 10 percent
Indiana's standard rate is tiered around a $1 million threshold.
The credit is 15 percent of the increase in Indiana qualified research expenses over a base amount, applied to the first $1,000,000 of that increase, and 10 percent of the increase above $1,000,000. It is incremental: only spending above the base earns credit, and the base cannot be less than 50 percent of the current year's Indiana research expenses, which caps how large the increase can be.
The qualified expense definition follows federal Section 41, limited to research conducted in Indiana.
The alternative method
Indiana offers a simpler flat rate for companies that elect it.
Indiana also allows an alternative incremental computation at a flat 10 percent for taxpayers who elect it. It can fit a company whose base amount is hard to establish under the standard method. Your CPA computes both and takes the larger.
Non-refundable, 10-year carryforward
The rate offsets Indiana tax and banks the rest.
The credit is not refundable and there is no carryback, but unused credit carries forward up to 10 taxable years. It is claimed on Schedule IT-20REC, filed with the Indiana income tax return. A pre-profit company banks the credit and draws it down as Indiana tax appears.
More on Indiana'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.
- Indiana Code Title 6, Article 3.1, Chapter 4 (research expense credit) - Indiana General Assembly
- Indiana Department of Revenue, Research Expense Credit handbook - Indiana Department of Revenue
- 26 U.S.C. ยง 41 (credit for increasing research activities) - Cornell Law School, Legal Information Institute
Get documentation built to survive an exam
R&D Binder produces the federal Section 41 binder and the Indiana state workpaper from one engagement, both built to survive an exam.