The Alternative Simplified Credit is the more commonly used of the two federal R&D credit computation methods, rewarding research spending that grows beyond recent historical levels.
How it works
With a 3-year QRE history, the base amount is 50% of the average prior-3-year QREs; the credit is 14% of current-year QREs exceeding that base. Without prior QRE history, the credit simplifies to 6% of current-year QREs directly.
What this does not include
This covers the Alternative Simplified Credit method only — the older “regular” R&D credit method uses a different, more complex base-period calculation that can sometimes produce a larger credit, requiring its own separate computation to compare.
How to use this calculator
- Enter current-year QREs, whether you have 3 years of prior QRE history, and the average prior-3-year QRE if applicable.
Frequently asked questions
What counts as a “qualified research expense”?
Generally wages for research employees, supplies used in research, and a portion of contract research costs, all tied to activities meeting the IRS’s specific four-part test for qualifying research.
Can a small business use the R&D credit against payroll tax instead of income tax?
Yes — qualified small businesses (generally under $5 million in gross receipts and within 5 years of first gross receipts) can elect to apply up to a capped amount of the credit against payroll tax instead.
Why would a company have no 3-year QRE history?
A newer company, or one just beginning to invest in qualifying research activities, wouldn’t have prior qualifying expenses to average — the simpler 6% rate accounts for that lack of baseline.
