Form 6765, Credit for Increasing Research Activities, is how a U.S. business claims the federal research credit for qualified research expenses. It's also where a qualified small business elects to use up to $500,000 of that credit against the employer share of Social Security tax instead of income tax. That payroll option is the reason many young companies with no income tax to offset still file it.
The form has changed shape in the last two years, and new reporting becomes mandatory from 2026. Everything below comes from the IRS Instructions for Form 6765 (Rev. December 2025, for the January 2025 form), checked in October 2026.
What counts as qualified research: the four-part test
- The costs are treated as domestic research or experimental expenditures under section 174A.
- The research is to discover information that's technological in nature.
- The information is meant to be useful in developing a new or improved business component.
- Substantially all of the activities are part of a process of experimentation relating to a new or improved function, performance, reliability or quality.
The test is applied separately to each business component, which is why the form asks how many components generated your expenses. The instructions also list activities that never qualify: research after commercial production begins, adapting an existing product for a particular customer, duplicating an existing product, surveys or studies, certain internal-use software, and research done outside the United States or its territories.
The payroll tax election for small businesses
| Rule | What the instructions say, as of October 2026 |
|---|---|
| Who qualifies | A corporation (including an S corporation) or partnership with gross receipts of less than $5 million for the tax year, and no gross receipts before the 5-tax-year period ending with that year |
| Maximum | $500,000 a year against the employer portion of Social Security tax |
| Amount | The smallest of the current year research credit, the amount you elect, or the general business credit carryforward (that last limit doesn't apply to partnerships or S corporations) |
| Deadline | On or before the due date of the original return, including extensions |
| Limit on years | No election for a year if you made it for 5 or more preceding tax years |
| Next form | Form 8974 to apply it against payroll taxes |
The "no gross receipts before the 5-year period" part is the one people overlook. It's built for businesses that are new as well as small: an older company with low revenue doesn't qualify just because its receipts are small. And the election has to be on the original return, so a startup that files late without it can lose the option for that year.
What changed for 2025 and 2026
- Section 174A, added by the 2025 law known as the One Big Beautiful Bill Act, lets taxpayers deduct domestic research and experimental expenditures for tax years beginning after December 31, 2024, or elect to amortize them over at least 60 months. Transition options apply to amounts capitalized from 2022 to 2024.
- Section G, Business Component Information, is optional for tax years beginning before 2026 and required for tax years beginning after 2025, subject to its guidelines.
- The section 280C reduced credit election is made at the top of the form on Item A, on an original timely filed return including extensions.
- Item B asks whether you're in a controlled group or under common control, and needs an attachment if you are.
- If you report qualified research expenses on line 48, you must complete Section E.
How to fill it in
- Answer Item A (the 280C election) and Item B (controlled group) at the top.
- Choose your method: Section A for the regular credit, or Section B for the alternative simplified credit. Skip Section A if you're electing, or already use, the simplified method.
- Complete Section D if you're a qualified small business making the payroll tax election.
- Complete Section E with other information about your expenses, including the number of business components and officer wages.
- Complete Section F, the qualified research expenses summary, and Section G where required.
- Attach Form 6765 to your return, and file Form 8974 with your employment tax return if you made the payroll election.
The income-tax part of the credit flows to Form 3800 with your other business credits, and the payroll part is used against the tax you report on Form 941. For a plain-English overview of the credit in both the U.S. and the UK, see our guide to R&D tax credits.
Common Form 6765 mistakes
- Missing the payroll election on the original return. It can't be added later for that year.
- Assuming low revenue is enough to qualify for the payroll election. You also can't have had gross receipts before the 5-year period.
- Counting work that's excluded, such as tailoring a product for one customer or research done abroad.
- Leaving out Section E when you've reported qualified research expenses on line 48. It's required.
- Not keeping project-level records. Section G becomes required from 2026, and it's much easier to fill in from records you've kept as you go.
Amended return claims need more detail
If you claim the credit on an amended return or an administrative adjustment request, the instructions say you must provide specific information for the claim to be considered valid. That's why reconstructing records after the fact is hard: the IRS wants the business components, the people and the expenses tied together.
The verdict
If your business builds or improves products, software or processes through real experimentation in the U.S., Form 6765 can be worth far more than the time it takes, and the payroll election means you don't need taxable profit to benefit. Keep project-level records from day one, make the payroll and 280C elections on the original return, and get ready for Section G becoming required from 2026.
Businesses that acquire qualifying property can claim a different credit, and our guide to the investment credit goes through that form part by part.
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Frequently asked questions
What is Form 6765 used for?
To figure and claim the federal credit for increasing research activities, and to make the payroll tax credit election for a qualified small business.
How much of the research credit can a small business use against payroll tax?
Up to $500,000 a year, against the employer portion of Social Security tax.
Who is a qualified small business for the payroll election?
A corporation, including an S corporation, or partnership with gross receipts under $5 million for the year and no gross receipts before the 5-tax-year period ending with that year.
Is Section G required on Form 6765?
It's optional for tax years beginning before 2026 and required for tax years beginning after 2025, subject to its guidelines.
When do I make the 280C election?
On Item A at the top of Form 6765, on your original timely filed return including extensions.
Does research done outside the U.S. count?
No. The instructions list research conducted outside the United States or a U.S. territory as excluded.
