Are R&D Tax Credits
Available in Florida?
Yes. The state of Florida provides a Research and Development (R&D) Tax Credit for qualified research activities conducted within the state. To qualify, a corporation must also claim the federal R&D credit under IRC §41.
Eligible Industries
Only corporations in the following targeted industries may claim the Florida R&D credit:
- Life Sciences
- Information Technology
- Aviation/Aerospace
- Homeland Security/Defense
- Cloud Information Technology
- Marine Sciences
- Materials Science
- Nanotechnology Industries
- Manufacturing
Non-Incremental R&D Credit
Eligible Entities:
Only C Corporations may claim the credit.
Qualified Research Expenses (QREs):
Same definition as IRC §41, but expenses must relate to research conducted in Florida.
Credit Calculation:
Equal to 10% of QREs in Florida exceeding the base amount (average QREs for the prior four years)
For corporations in existence less than four years, the credit is reduced 25% for each missing year.
Federal Requirement:
Corporations must claim a federal R&D credit to be eligible for the Florida credit.
Credit Limit:
The credit is limited to 50% of a corporation’s net income tax liability after all other credits.
Annual Cap:
The total credit available for all taxpayers is $9 million, prorated if the cap is reached.
Application Process:
Corporations must apply for an allocation of the Florida R&D credit electronically to the Department of Revenue (DOR) between March 20 and March 26 each year. Applications must include a certification letter from the Department of Commerce (DOC) confirming the corporation is an eligible qualified target industry business.
Carryforward:
Excess credits may be carried forward for up to 5 years.
Certification Requirement:
Companies must be certified by the Department of Economic Opportunity as a qualified target business in one of the eligible industries.
Florida R&D Tax Credit Case Study
An Orlando company designs and develops component parts for the aviation industry, a qualified target business industry for Florida’s R&D tax credit. The company started R&D in 2020 and claims R&D credits each year for the development activities of its engineers. The company submits its application and is awarded an R&D credit for the 2024 tax year. Prior year Florida QREs for 2020, 2021, 2022, and 2023 are as follows: $600,000, $700,000, $800,000, and $900,000, respectively. The Federal credit calculated below is utilizing the Alternative Simplified Method.
FEDERAL | FLORIDA | |||
Year | Total QREs | Credit | Total QREs | Credit |
2024 | $1,000,000 | $84,000 | $1,000,000 | $25,000 |
Federal R&D Tax Credit Summary
Year | Total QREs | Credit |
2024 | $1,000,000 | $84,000 |
Florida R&D Tax Credit Summary
Year | Florida Total |
2024 | $25,000 |
Qualifying Research Activities
The four-part test that defines what counts as qualified research activities under
the R&D Tax Credit program
Purpose of the Research
The activity should develop or improve a business component, such as a product, process, software, formula, technique, or invention, by enhancing functionality, performance, reliability, or quality.
Resolving Uncertainty
The work must address technical uncertainties, such as determining the optimal design, method, or approach to achieve the desired outcome. The results should not be known in advance.
Systematic Experimentation
Eligible research must follow a structured experimentation process, including trial and error, modeling, simulation, or testing alternatives to reach the intended improvement.
Technological Basis
The activity should develop or improve a business component, such as a product, process, software, formula, technique, or invention, by enhancing functionality, performance, reliability, or quality.
Why the R&D Tax Credit Matters ?
Since 1981, the R&D Tax Credit has helped businesses save billions in federal and state taxes. The credit enables companies to hire more staff, expand R&D, invest in facilities, and drive innovation. Thousands of businesses across multiple industries take advantage of this benefit each year.