Minnesota’s R&D Tax Credit: It’s Not Just for White Lab Coats Anymore – Small Business Blog

Minnesota’s R&D Tax Credit: It’s Not Just for White Lab Coats Anymore

It used to be that to qualify for an R&D tax credit you practically needed a microscope and lab coat. Not any more. The new Minnesota R&D tax credit is much more small business-friendly.

Minnesota’s new-and-improved research and development tax credit doubles the size of the credit and also expands the credit to include more business entities. The tax credit for R&D expenditures is 10 percent, up to the first $2 million in eligible expenses. The credit is 2.5 percent for eligible expenses above $2 million.

Individuals involved in partnerships, S-corporations and limited liability companies are allowed to claim the credit against their individual income taxes. This opens up the tax credit to more small and medium-sized businesses.

To claim the credit, the partner or shareholder must complete Schedule M1B, Business and Investment Credits, and include Schedule M1B and Schedule KPI or KS when filing his or her Minnesota income tax return.

Source: Minnesota Department of Employment and Economic Development

In the past these tax credits were taken mostly by large corporations, but now I will be investigating these for our small business clients. 

For More Information

Contact the Minnesota Department of Revenue at 651-556-3075 or email businessincome.tax@state.mn.us.

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