The Form 6765 research credit instructions explain how eligible taxpayers calculate and claim the federal Credit for Increasing Research Activities. Form 6765 is used to calculate the research credit, make the Section 280C reduced-credit election, and, for eligible qualified small businesses, elect to apply a portion of the credit against payroll taxes.

The IRS currently provides Instructions for Form 6765 (Rev. December 2025) for use with the January 2025 revision of Form 6765. Because the form and reporting requirements have changed over time, taxpayers should use the instructions applicable to their tax year.

What Is Form 6765?

Form 6765 is an IRS form used to figure and claim the federal research credit.

According to the IRS, the form can be used to:

• Calculate the credit for increasing research activities
• Make the Section 280C reduced-credit election
• Elect and calculate the qualified small business payroll tax credit

Partnerships and S corporations generally must file Form 6765 to claim the credit. Other taxpayers may have different filing procedures when their only source of the research credit is a partnership, S corporation, estate, or trust.

What Is the Research Credit?

The federal research credit is generally available for certain qualified research expenses incurred in carrying on a trade or business.

The IRS describes qualified research using a four-part test. Generally, the research must:

1. Relate to qualifying domestic research or experimental expenditures.
2. Be undertaken to discover information that is technological in nature.
3. Be intended to develop a new or improved business component.
4. Substantially involve a process of experimentation relating to a new or improved function, performance, reliability, or quality.

The four-part test generally must be applied separately to each business component.

What Are Qualified Research Expenses?

Qualified research expenses, commonly called QREs, are an important part of the Form 6765 calculation.

Depending on the taxpayer's circumstances, qualifying expenses can include certain:

• Employee wages
• Supplies
• Contract research expenses
• Computer rental or lease expenses
• Certain basic research payments

Businesses should not assume that every expense associated with research and development qualifies. The activity and expense must meet the applicable requirements.

Form 6765 Research Credit Instructions: Sections Explained

Form 6765 contains several sections. The sections a taxpayer completes depend on the taxpayer's circumstances, research activities, elections, and filing requirements.

Section A — Regular Credit

Section A is used when calculating the research credit under the regular credit method.

The IRS instructions state that taxpayers should skip Section A if they are electing the Alternative Simplified Credit (ASC) or previously elected the ASC and are not revoking that election for the current return.

Taxpayers eligible for more than one calculation method may want to calculate the credit using the applicable methods before determining the appropriate approach.

Section B — Alternative Simplified Credit

Section B is used for the Alternative Simplified Credit (ASC).

The IRS states that taxpayers use this section when they are electing the ASC or previously elected the ASC and are not revoking the election for the current return.

An ASC election has specific timing and revocation rules. Therefore, taxpayers should review the current instructions before making the election.

Section C — Current-Year Credit

Section C is used to determine the applicable current-year research credit after completing the relevant calculations.

The resulting credit may then need to be reported through the appropriate tax-return forms depending on the taxpayer's entity type.

Because the reporting process can differ among corporations, partnerships, S corporations, and other taxpayers, review the instructions applicable to your filing situation.

Section D — Payroll Tax Credit Election

Certain qualified small businesses may elect to apply a portion of their research credit against the employer portion of Social Security taxes.

The IRS instructions state that the maximum amount of research credit a qualified small business can apply against payroll tax liability is $500,000.

Section D is used when making this payroll-tax election.

Eligibility requirements apply, so a business should confirm that it qualifies before making the election.

Section E — Other Information

Section E contains additional information requirements.

The current IRS instructions state that if qualified research expenses are reported on line 48, Section E must be completed.

Taxpayers should review the instructions for the specific lines applicable to their situation rather than assuming that every filer completes the section in the same way.

Section F — Qualified Research Expenses Summary

Section F is the Qualified Research Expenses Summary.

This section is used to indicate whether the taxpayer is required to complete Section G and to report total qualified research expenses on the applicable lines.

After completing the applicable portions of the form, taxpayers enter the required total from Section F, line 48, on the appropriate line in Section A or Section B.

Section G — Business Component Information

Section G is titled Business Component Information and contains detailed reporting about qualifying business components.

One important point in the current instructions is that the Section G requirement depends on the tax year.

For tax years beginning before 2026, Section G is optional for all filers, subject to special rules for amended returns.

For tax years beginning after 2025, Section G becomes required, subject to specific exceptions and reporting guidelines.

What Information Goes Into Section G?

When Section G is required, taxpayers generally report business-component information covering at least 80% of total QREs, while reporting no more than 50 business components under the applicable 80%/Top 50 approach.

Information can include details about:

• Business components
• Qualified research wages
• Qualified supply expenses
• Contract research expenses
• Other applicable QRE information
• Research activities
• Research-credit calculations

Business components are generally reported in descending order based on total QREs.

Remaining business components can be reported in aggregate when permitted by the instructions.

What Is a Business Component?

A business component can include a product, process, computer software, technique, formula, or invention that meets the applicable research-credit requirements.

Examples may include:

• A newly developed software system
• An improved manufacturing process
• A new technical product
• An experimental production technique
• An improved technological process

The research test should be applied separately to each applicable business component.

How to Calculate Qualified Research Wages

Employee wages can represent a significant portion of qualified research expenses.

Start by reviewing payroll and employee records.

Determine which employees performed qualified research services and identify the portion of wages attributable to those activities.

For example, an engineer may spend part of the year conducting qualifying experimentation and another portion performing administrative duties. The taxpayer should maintain records supporting the allocation used in the QRE calculation.

Useful documentation may include:

• Payroll records
• Time records
• Project assignments
• Employee activity descriptions
• Research documentation

How to Calculate Qualified Supply Expenses

Certain supplies used in qualified research can be included in QREs.

Businesses should identify materials and supplies used during qualifying experimentation, development, testing, or other eligible activities.

Keep invoices and accounting records showing:

• What was purchased
• When it was purchased
• How it was used
• Which research project used the item

Avoid automatically including all expenses charged to a research or engineering department.

How Contract Research Expenses Work

Businesses may hire outside contractors to perform research activities.

Certain contract research expenses may qualify for the research credit if the applicable requirements are satisfied.

Maintain:

• Written contracts
• Invoices
• Payment records
• Project descriptions
• Research reports
• Technical documentation

These records can help connect the expense to the qualifying research activity.

What Activities Don't Qualify?

The IRS instructions identify several categories of activities that generally don't qualify for the research credit.

Examples include:

• Research conducted after the beginning of commercial production
• Research adapting an existing product or process to a particular customer's needs
• Duplication of an existing product or process
• Surveys or studies
• Certain internal-use computer software research
• Research conducted outside the United States or U.S. territories
• Research in the social sciences, arts, or humanities

Specific exceptions can apply, so taxpayers should review the current IRS rules before excluding or including an activity.

Section 280C Election

Form 6765 includes an election relating to the Section 280C reduced credit.

The current instructions state that the election is made at the top of Form 6765, Item A, by checking Yes or No on an original timely filed return, including extensions. The election cannot be made or changed on an amended return and is irrevocable for that tax year.

Because this election can affect the tax treatment of the research credit, review the current instructions carefully before making it.

Controlled Group and Common-Control Rules

Item B asks whether the taxpayer is a member of a controlled group or business under common control.

If the answer is yes, an attachment with information about the controlled group may be required.

The IRS instructions specify information such as:

• Entity EIN
• Entity name
• Common parent or designated member
• Qualified research wages
• Qualified supplies
• Contract research expenses
• Total QREs
• Credit percentage
• Applicable credit amount

Controlled-group rules can be complex, particularly when multiple entities conduct research activities.

Form 6765 and Amended Returns

Special requirements can apply when claiming a research credit on an amended return or administrative adjustment request.

The IRS states that certain information must be provided for a research-credit refund or credit claim to be considered valid when the credit was not reported on the original return or is being increased.

Taxpayers should therefore review the current amended-return requirements before submitting a research-credit claim.

Recent Form 6765 Updates

The IRS revised the January 2025 Form 6765 instructions to provide additional clarification concerning qualified research expenses and group reporting. The IRS specifically revised portions concerning line 5, the ASC election, line 20, Section E, and Section F.

The IRS also lists the December 2025 Form 6765 instructions as the current instructions for use with the January 2025 revision of the form.

This is why taxpayers should avoid relying solely on older articles or previously downloaded instructions.

Common Form 6765 Research Credit Mistakes

Claiming Every R&D Expense

An expense doesn't qualify simply because it is associated with research and development.

Evaluate both the underlying activity and the expense.

Using Outdated IRS Instructions

Research-credit rules and reporting requirements can change.

Always verify the applicable version of Form 6765.

Poor Documentation

Keep records that demonstrate the research performed and how the QRE amounts were calculated.

Incorrect Wage Allocation

Don't automatically claim all wages of employees working in a research department.

Determine the portion attributable to qualified research.

Ignoring Controlled-Group Rules

Related businesses may need to consider controlled-group or common-control requirements.

What Records Should You Keep?

Businesses claiming the research credit should maintain documentation supporting the calculation.

Useful records may include:

• Payroll reports
• Employee time records
• Project descriptions
• Research notes
• Technical documents
• Testing records
• Prototype information
• Supplier invoices
• Contractor agreements
• General ledger reports
• QRE calculations
• Business-component records

A well-organized documentation process can make it easier to substantiate the credit calculation.

Frequently Asked Questions

What are the Form 6765 research credit instructions?

The instructions explain how to calculate and claim the federal credit for increasing research activities, make applicable elections, report qualified research expenses, and complete the required sections of Form 6765.

What is Form 6765 used for?

Form 6765 is used to calculate the research credit, make the Section 280C reduced-credit election, and, for eligible qualified small businesses, elect and calculate the payroll tax credit.

What are qualified research expenses?

QREs generally include qualifying in-house research expenses and certain contract research expenses. Potential categories include wages, supplies, and qualifying contract research costs.

Is Section G required for the 2025 tax year?

For tax years beginning before 2026, Section G is optional for all filers under the current December 2025 instructions, subject to applicable amended-return rules.

What is the maximum payroll tax research credit?

The current IRS instructions state that a qualified small business can apply no more than $500,000 of research credit against payroll tax liability.

Can software development qualify for the research credit?

Certain software development activities can qualify if they satisfy the applicable research-credit requirements. Software development alone does not automatically qualify.

Do I need documentation for Form 6765?

Yes. Businesses should maintain records supporting the qualifying research activities, business components, QREs, calculations, and applicable elections.

Need Consultation About the Research Credit?

If you're unsure about the Form 6765 research credit instructions, qualified research expenses, business-component reporting, or the applicable filing requirements, you can call 1-866-513-4656 for consultation.

Before filing, verify the current IRS form and instructions for your specific tax year. A qualified tax professional can review your individual circumstances and determine which research-credit rules and elections may apply.

This article is for general informational purposes only and is not tax or legal advice. Form 6765 requirements can vary depending on the taxpayer, entity structure, tax year, research activities, and applicable federal law.

Conclusion

Understanding the Form 6765 research credit instructions is important for businesses that want to determine whether they can claim the federal research credit.

Start by identifying qualifying research activities and business components. Then calculate eligible wages, supplies, contract research expenses, and other applicable QREs. Review the regular and Alternative Simplified Credit methods, consider any Section 280C election, and determine whether additional reporting such as Section G applies.

For the most accurate information, use the current IRS Form 6765 and instructions rather than relying on older versions. The IRS currently provides the December 2025 instructions for use with the January 2025 revision of Form 6765.

If you're uncertain about eligibility or how to report a research credit, consider obtaining professional tax advice before filing.