Short answer. You can claim both. Indiana runs its own credit on Indiana research, computed two ways, 15 percent of the first $1 million over a base and 10 percent above, or a 10 percent simplified method, separate from the federal Section 41 credit. The Indiana credit is nonrefundable and carries forward 10 years.
Key facts
| Claim both? | Yes, on the same Indiana research |
|---|---|
| Federal rate | 20% regular / 14% ASC |
| Indiana rate | 15% of the first $1M over a base, 10% above; or a 10% simplified method |
| Indiana refundable? | No |
| Forms | Form 6765 (federal) + Schedule IT-20REC (Indiana) |
Two credits on the same research
Indiana computes its own credit on Indiana expenses; the federal credit runs on your nationwide expenses.
The federal Section 41 credit is claimed on Form 6765 with your federal return. Indiana's credit is claimed on Schedule IT-20REC with the Indiana return, and the same research performed in Indiana can support both in the same year.
Indiana uses the federal Section 41(b) definition of qualified research expenses but applies its own rates to the Indiana portion, so the federal work is the basis for the state claim.
Federal Section 41 vs. Indiana, factor by factor
Indiana lets you pick between two calculation methods and has a high first-tier rate.
| Factor | Federal Section 41 | Indiana |
|---|---|---|
| What it is | Credit for increasing research activities | Indiana research expense credit |
| Credit rate | 20% regular / 14% ASC | 15% of the first $1M of Indiana QRE over a base and 10% above; or a 10% simplified method |
| 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 | 10 years, no carryback |
| Where research must occur | United States | Indiana only |
| How you claim it | Form 6765 with the federal return | Schedule IT-20REC with the Indiana return |
| 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(b) definition, Indiana research only |
Where Indiana differs from federal
Two differences matter most when you claim both.
Two methods, a high first tier. Indiana lets you compute the credit the regular way, 15 percent of the first $1 million of Indiana research over a base and 10 percent above, or under a 10 percent simplified method, and you take whichever produces the larger credit. The 15 percent first-tier rate is among the higher state rates.
Indiana only, nonrefundable. Only research conducted in Indiana counts, the credit offsets Indiana tax, and unused amounts carry forward 10 years. 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 Indiana relies on too.
Because Indiana uses the federal Section 41(b) definition of qualified research expenses, 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 Indiana claim, limited to the in-state share. You build the evidence once.
R&D Binder documents the federal Section 41 four-part test that both credits stand on, with Indiana 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 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. § 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 Indiana state workpaper from one engagement, both built to survive an exam.