Short answer. You can claim both. Maryland runs its own credit, currently 10 percent of the growth in your Maryland research over a base, separate from the federal Section 41 credit, so the same in-state work earns both. Maryland is a competitive, capped program you apply to the Department of Commerce for, and it is refundable only for a certified small business; the rest carries forward seven years.
Key facts
| Claim both? | Yes, on the same Maryland research |
|---|---|
| Federal rate | 20% regular / 14% ASC |
| Maryland rate | 10% of Maryland research over a base (capped program, often prorated) |
| Maryland refundable? | Refundable for a certified small business; otherwise no |
| Forms | Form 6765 (federal) + Form 500CR (Maryland), after Commerce certification |
Two credits on the same research
Maryland computes its own credit on Maryland expenses, but you apply for it; the federal credit is claimed as of right on your return.
The federal Section 41 credit is claimed on Form 6765 with your federal return. The Maryland credit is different in shape: you apply to the Maryland Department of Commerce, which certifies an amount, and then you claim it on Form 500CR. The same research performed in Maryland can support both.
Maryland follows the federal definition of qualified research but applies its 10 percent rate to the growth in your Maryland research over a base, so the federal work is the foundation for the state claim.
Federal Section 41 vs. Maryland, factor by factor
The biggest difference is that Maryland is a capped, competitive program rather than an as-of-right credit.
| Factor | Federal Section 41 | Maryland |
|---|---|---|
| What it is | Credit for increasing research activities | Maryland research and development tax credit |
| Credit rate | 20% regular / 14% ASC | 10% of the growth over a Maryland base (often prorated because the program is capped) |
| Refundable | No - a QSB may offset up to $500,000 of payroll tax under Section 41(h) | Refundable for a certified small business (assets under $5M); otherwise no |
| Carryforward | 20 years, with a 1-year carryback | 7 years, no carryback |
| Where research must occur | United States | Maryland only |
| How you claim it | Form 6765 with the federal return | Apply to the Department of Commerce, then claim on Form 500CR |
| 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, Maryland research only |
Where Maryland differs from federal
Two features set Maryland apart from the federal credit.
Apply, do not just claim. The federal credit is claimed as of right on your return. The Maryland credit is a competitive program with a statewide cap, so you apply to the Department of Commerce by the annual deadline, and because demand usually exceeds the cap, certified credits are prorated below the 10 percent maximum. The program is currently authorized through January 31, 2031, subject to legislative extension.
Refund for small companies. A certified small business with assets under $5 million can take the Maryland credit as a refund; other companies carry unused credit forward seven years. The federal credit is not refundable, though a qualified small business can offset up to $500,000 of payroll tax under Section 41(h).
One evidence base for both
The records that prove the federal claim are what Maryland's application asks for too.
Maryland's application follows the federal definition of qualified research and asks for the federal credit detail, so the four-part test analysis and the wage, contractor, and supply records that substantiate your federal credit under Treas. Reg. 1.41-4 are the same records Maryland relies on, limited to the in-state share.
R&D Binder documents the federal Section 41 four-part test that both credits stand on, with Maryland 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 Maryland'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.
- Maryland Department of Commerce, Research and Development Tax Credit program - Maryland Department of Commerce
- Comptroller of Maryland, Tax Credits, Deductions and Subtractions - Comptroller of Maryland
- 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 Maryland state workpaper from one engagement, both built to survive an exam.