Can Companies Claim
R&D Tax Credits in Georgia?
Yes. Georgia provides a Research and Development (R&D) Tax Credit, a valuable benefit for companies developing new products and services. The credit is available to new companies, start-ups, and established businesses that are either starting R&D for the first time or expanding existing research activities.
Key Details of the Georgia R&D Tax Credit:
Qualified Research Expenses (QREs):
Same definition as IRC §41, but must be for research conducted within Georgia.
Credit Amount:
10% of QREs in excess of the base amount.
Base Amount:
Calculated by multiplying the current year’s Georgia gross receipts by the lesser of 30% or the average ratio of QREs to Georgia gross receipts for the prior three years.
Usage:
Can offset up to 50% of net Georgia income tax liability after all other credits have been applied.
Excess Credit:
Can be applied against state payroll withholding.
Carryforward:
Unused credits can be carried forward for up to 10 years.
Claiming the Credit:
Submit Form IT-RD along with Federal Form 6765 with the Georgia income tax return for each year QREs were incurred.
Georgia Tax Credit Case Study
An Atlanta company designing and developing industrial components for the auto industry claimed R&D credits for a multi-year project from 2021 to 2024.
Federal R&D Tax Credit: $247,500 (using the Alternative Simplified Method)
Georgia State R&D Tax Credit: $195,000
Year | Federal QREs | Federal Credit | Georgia QREs | Georgia Gross Receipts | Georgia Credit |
2024 | $450,000 | $27,000 | $450,000 | $250,000 | $37,500 |
2023 | $575,000 | $34,500 | $575,000 | $400,000 | $45,500 |
2022 | $650,000 | $39,000 | $650,000 | $500,000 | $50,000 |
2021 | $800,000 | $72,917 | $800,000 | $600,000 | $62,000 |
Total | $2,475,000 | $247,500 | $2,475,000 | $1,750,000 | $195,000 |
Federal R&D Tax Credit Summary
| Year | Total QREs | Federal Credit |
|---|---|---|
| 2024 | $450,000 | $27,000 |
| 2023 | $575,000 | $34,500 |
| 2022 | $650,000 | $39,000 |
| 2021 | $800,000 | $72,917 |
| Total | $2,475,000 | $247,500 |
Georgia R&D Tax Credit Summary
| Year | Georgia Credit |
|---|---|
| 2024 | $37,500 |
| 2023 | $45,500 |
| 2022 | $50,000 |
| 2021 | $62,000 |
| Total | $195,000 |
Criteria for Qualifying Research Activities
The four-part test below defines what counts as qualified research activities
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 must rely on hard sciences such as engineering, physical or biological sciences, or computer science. Artistic, social science, or routine data collection work does not qualify.
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.