IRS Instruction 6765 – IRS Forms, Instructions, Pubs 2026 – Businesses investing in innovation can significantly reduce their tax liability through the federal Research and Development (R&D) tax credit, also known as the Credit for Increasing Research Activities under IRC Section 41. The primary way to claim this credit is by filing IRS Form 6765, guided by the official IRS Instructions for Form 6765 (Revision December 2025, for use with the January 2025 revision of the form).
This comprehensive guide explains everything you need to know about IRS Instruction 6765, including eligibility, qualified research expenses (QREs), calculation methods, new reporting requirements, and step-by-step completion instructions. It draws from the latest official IRS guidance as of February 2026.
Download the official IRS Instructions for Form 6765 PDF here: https://www.irs.gov/pub/irs-pdf/i6765.pdf. Always use the most current version from IRS.gov for your tax year, and consult a qualified tax professional for personalized advice.
What Is Form 6765 and the R&D Tax Credit?
Form 6765 calculates and claims the credit for qualified research expenses that exceed a base amount. Partnerships and S corporations must file it to claim the credit; other taxpayers generally report it on Form 3800 (General Business Credit) unless they have direct sources of the credit or need to make elections (e.g., payroll tax credit or reduced credit under Section 280C).
The credit rewards U.S.-based innovation by offsetting taxes dollar-for-dollar in many cases. It applies to wages, supplies, and certain contract research costs tied to developing or improving products, processes, software, techniques, formulas, or inventions.
Recent Updates and What’s New in IRS Instruction 6765 (2025–2026)
Key developments include:
- Section G (Business Component Information): Optional for tax years beginning before 2026 (including most 2025 returns filed in 2026). It becomes mandatory for tax years beginning after 2025. Taxpayers must generally report details on business components accounting for 80% of QREs (up to the top 50 components), with the remainder aggregated. Exceptions apply for certain small claimants.
- New Section 174A (Domestic R&E Deduction): Under the One Big Beautiful Bill Act (P.L. 119-21), taxpayers can deduct domestic research and experimental (R&E) expenditures immediately for tax years beginning after December 31, 2024, instead of capitalizing and amortizing them. An election allows capitalization and amortization over at least 60 months. Transition rules apply to prior capitalized amounts (see Rev. Proc. 2025-28). This change aligns with qualified research definitions under the credit.
- Enhanced Reporting: New Sections E and F require summaries of QREs by category and additional details (e.g., number of business components, officer wages as QREs, acquisitions/dispositions, and use of the ASC 730 Directive).
- Payroll Tax Credit: Qualified small businesses can apply up to $500,000 of the credit against the employer portion of Social Security taxes.
- Amended Return Requirements: Specific documentation is now required for refund claims involving the research credit.
These updates aim to improve compliance and IRS review efficiency while giving taxpayers transition time.
Who Qualifies for the R&D Tax Credit?
You qualify if you incur qualified research expenses (QREs) in carrying on a trade or business and meet the four-part test for qualified research (applied to each business component).
Qualified research generally involves:
- Expenditures treated as domestic research or experimental expenditures under Section 174A.
- Discovering technological information (relying on physical, biological, engineering, or computer sciences).
- A new or improved business component (product, process, software, etc.).
- A process of experimentation to resolve technical uncertainty regarding function, performance, reliability, or quality.
Excluded activities include research after commercial production begins, adaptation to a specific customer’s needs, duplication of existing components, market research, social sciences/humanities research, and foreign research.
Internal-use software has additional rules, including a high-threshold-of-innovation test in many cases.
Eligible small businesses (for AMT offset) and qualified small businesses (for payroll tax credit) have gross receipts tests (generally under $50 million average for the former; under $5 million with no prior gross receipts in the 5-year lookback for the latter).
Qualified Research Expenses (QREs) Explained
QREs include:
- In-house research: Wages for qualified services (direct performance, supervision, or support of qualified research), supplies consumed in the research, and off-site computer rentals.
- Contract research: 65% of amounts paid to third parties (100% for certain universities, consortia, or energy research; 75% for qualified research consortia).
Basic research payments to qualified organizations and energy research consortium payments may also qualify, subject to limits.
Section F of Form 6765 now summarizes QREs by category (wages, supplies, computer rentals, contract research, etc.).
The IRS Four-Part Test for Qualified Research (visual overview of the core eligibility criteria).
How to Calculate the R&D Tax Credit?
You can use either the regular credit (Section A) or the alternative simplified credit (ASC) (Section B). Many taxpayers calculate both and choose the larger one.
- Regular Credit: 20% of QREs exceeding a fixed-base percentage (based on historical QREs and gross receipts) times average prior 4-year gross receipts (or 50% of current QREs, whichever is smaller). Start-up rules apply simplified percentages.
- ASC: 14% (or adjusted) of QREs exceeding 50% of the average QREs from the prior 3 years. Simpler for companies without long history.
If you elect the reduced credit under Section 280C, the credit percentage decreases (e.g., to about 15.8% for regular), but you avoid reducing your R&E deduction.
The final credit flows to Form 3800.
Step-by-Step Guide to Completing Form 6765 (Per IRS Instructions)
- Top of Form (Items A and B):
- Item A: Elect (or not) the Section 280C reduced credit (irrevocable for the year on timely filed return).
- Item B: Indicate if part of a controlled group or common control; attach details if “Yes.”
- Sections A & B: Calculate regular or ASC credit using total QREs from Section F, line 48.
- Section C: Aggregate current-year credit and make allocations (e.g., for estates/trusts).
- Section D: Elect and calculate payroll tax credit (up to $500,000 for qualified small businesses). Claim on Form 8974.
- Section E (Other Information): Complete if reporting QREs on line 48. Includes number of business components, officer wages as QREs, acquisitions/dispositions, new expense categories, and ASC 730 Directive election.
- Section F (QRE Summary): Break down total QREs by type.
- Section G (Business Component Information): For applicable years, provide details (e.g., principal business activity code, component type, software category, and QRE breakdown by wages/supplies/contract) for the top business components representing 80% of QREs (up to 50). Aggregate the rest. ASC 730 Directive filers have simplified options.
Tip: For e-filing, follow specific attachment naming conventions (e.g., “Form6765ItemASection280C.pdf”).
Controlled Groups, Payroll Election, and Amended Claims
- Controlled Groups: Treated as a single taxpayer for credit calculation; allocate based on proportionate QREs. Attach group details.
- Payroll Tax Credit: Limited to $500,000 aggregate for the group; elected per member but subject to group limits.
- Amended Returns: Must include specific claim information and a research credit study for validity.
Common Mistakes to Avoid
- Failing to document the four-part test and process of experimentation contemporaneously.
- Including non-qualified activities or foreign expenses.
- Missing new Section E/F/G reporting requirements.
- Incorrectly handling controlled group allocations or 280C election timing.
- Overlooking the impact of Section 174A deduction changes on credit calculations.
Benefits of Claiming the R&D Tax Credit
The credit can provide substantial cash flow benefits, reduce tax liability, and even generate refunds via carrybacks (where allowed) or payroll tax offsets for startups and small businesses. It encourages ongoing innovation across industries like software, manufacturing, engineering, biotech, and more.
Download the Latest Instructions
Official Download: IRS Instructions for Form 6765 (Rev. December 2025) PDF.
Also check IRS.gov/Form6765 for future developments and the latest Form 6765 itself.
FAQ: IRS Form 6765 and R&D Credit
- Do I have to file Form 6765 every year?
Partnerships and S corps must file it to claim the credit. Others may not need to if the credit comes only from pass-through entities, but elections often require it. - Is Section G required for 2025 tax returns?
Generally optional for tax years beginning before 2026. - Can startups claim the credit against payroll taxes?
Yes, qualified small businesses can elect up to $500,000 against employer Social Security taxes. - What records do I need?
Detailed contemporaneous documentation of qualified activities, expenses, and business components. - Does the credit apply to software development?
Yes, if it meets the qualified research criteria (with special rules for internal-use software). - This article is for informational purposes only and is not tax or legal advice. Tax rules are complex and subject to change. Consult a CPA, tax attorney, or enrolled agent familiar with R&D credits for your specific situation. For the most current guidance, refer directly to the IRS instructions and publications.
By following IRS Instruction 6765 carefully and maintaining strong documentation, eligible businesses can maximize this valuable incentive for innovation. Start reviewing your R&E activities today to see if you qualify for substantial tax savings.