Are R&D Tax Credits
Available in Maryland?
Yes. Maryland offers a Research and Development (R&D) Tax Credit for businesses with qualified research expenses (QREs).
Credit Highlights
Growth R&D Tax Credit:
10% of QREs exceeding the Maryland Base Amount.
Base Amount:
Calculated by dividing the aggregate QREs by the aggregate Maryland gross receipts for the four years prior to the credit year.
Annual Credit Cap:
$12 million total for all businesses, with $3.5 million reserved for small businesses.
Individual Limit:
No single applicant may receive more than $250,000 in credits.
Federal Alignment:
Maryland follows the federal definition of qualified R&D and QREs under IRC §41(b).
Application Deadline:
Submit by November 15 for expenses incurred in the previous calendar year.
Carryforward:
Unused credits may be carried forward up to 7 years.
Controlled Groups:
All members of a controlled group are treated as a single taxpayer.
Carryforward:
Unused credits may be carried forward up to 7 years.
Maryland R&D Tax Credit Case Study
Maryland State R&D Tax Credit: $149,500
FEDERAL | MARYLAND | |||
Year | Total QREs | Credit | Total QREs | Credit |
2024 | $3,000,000 | $261,333 | $3,000,000 | $149,500 |
2023 | $2,600,000 | $224,000 | NA | NA |
2022 | $2,200,000 | $184,333 | NA | NA |
2021 | $2,000,000 | $177,334 | NA | NA |
Total | $9,800,000 | $847,000 | $3,000,000 | $149,500 |
Federal R&D Tax Credit Summary
| Year | Total QREs | Federal Credit |
|---|---|---|
| 2024 | $3,000,000 | $261,333 |
| 2023 | $2,600,000 | $224,000 |
| 2022 | $2,200,000 | $184,333 |
| 2021 | $2,000,000 | $177,334 |
| Total | $9,800,000 | $847,000 |
Maryland R&D Tax Credit Summary
| Year | Maryland Credit |
|---|---|
| 2024 | $149,500 |
| 2023 | NA |
| 2022 | NA |
| 2021 | NA |
| Total | $149,500 |
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.