How much of Iowa's R&D credit comes back as cash?

For tax years beginning before January 1, 2026, the Research Activities Credit is computed on Form IA 128 or IA 128S and carried to the IA 148. Any business earning the credit gets the refund treatment, and a business with a High Quality Jobs contract claims the supplemental credit at a higher refund rate.

From tax years beginning on or after January 1, 2026, the credit comes from an Iowa Economic Development Authority program under Iowa Code 15.524. To receive anything, the business first has to be certified by the IEDA as a qualified business, and its spending has to be verified by an independent Iowa CPA.

Legacy, tax year 2025: credit above the tax is refunded at 70 percent under IA 148 code 58, or 85 percent under code 59 for the supplemental credit. An illustrative example with round numbers: a SaaS company with a $20,000 credit and $2,000 of Iowa tax has $18,000 of excess. At 70 percent, $12,600 is refunded and the other $5,400 is lost.

New program, 2026 on: the award is up to 3.5 percent of eligible Iowa expenditures and is refundable in full. When statewide demand exceeds $40 million, awards are prorated; the IEDA's own worked example ends at an effective 2.26 percent. Illustratively, $1,000,000 of eligible Iowa spending would support at most $35,000, and $22,600 at 2.26 percent. With no Iowa tax, that whole award comes back as cash.

1. Get certified by the IEDA as a qualified business.
2. Have an independent Iowa CPA verify the spending.
3. Apply by January 31 after the federal return for the spending year is filed and accepted. For a calendar-year company, 2026 spending means an application due January 31, 2028.
4. Watch for award decisions, expected around April 1, and the tax credit certificate that follows.
5. Claim the credit on the IA 148 for the tax year after the spending year.

Under the legacy credit, the 30 percent (or 15 percent) that is not refunded expires. It cannot be carried forward, so it is simply gone.

Under the new program nothing is left over, because the award is refundable in full. The one choice is timing: instead of taking a refund, the business can apply the overpayment to the next year's tax. The credit is not transferable, so selling it to another taxpayer is not an option.

The new program puts an independent Iowa CPA's verification between the company and the refund, and the IEDA awards credit on the spending that verification covers. A company that cannot show which work was research and who did it will struggle to get its spending verified at all.

R&D Binder produces the federal Section 41 documentation from your commit history and payroll, the research record the Iowa claim rests on. Your CPA files, and whether your facts qualify is your CPA's call.

• Iowa's R&D credit (full overview)
• Iowa R&D credit rate
• Iowa vs the federal credit
• How to file for Iowa's R&D credit
• The Section 41 four-part test
• What is a qualified research expense (QRE)?
• Form 6765 and Section G
• Connecticut R&D credit
• Delaware R&D credit

• Iowa Code 15.524 (R&D tax credit: amount, timing, refunds) - Iowa Legislature
• Iowa Code 422.10 (Research Activities Credit, tax years before 2026) - Iowa Legislature
• IEDA, Iowa Research and Development Tax Credit Program overview - Iowa Economic Development Authority
• Iowa 2025 IA 148 Tax Credits Schedule instructions - Iowa Department of Revenue
• BDO, Iowa enacts substantial changes to state's research credit (March 2022) - BDO USA
• RSM US, Implementing Iowa's new R&D tax credit (March 2026) - RSM US LLP