Form 6765 Instructions: Qualified Research Activities, Expenses, and Reporting

Businesses that invest in product development, software, engineering, manufacturing, or other qualifying research may be able to claim the federal research credit. However, completing Form 6765 requires more than identifying expenses labeled as "R&D." Taxpayers must determine whether their activities meet the qualified research requirements, calculate qualified research expenses (QREs), identify applicable business components, and provide the required information with their tax return.

The Form 6765 Instructions are particularly important for 2026 because the IRS has introduced significant reporting changes for tax years beginning after 2025. Businesses reviewing qualified research activities, expenses, or reporting requirements can reach +1(866)-513-4656 for assistance with understanding the filing process and organizing the information needed for the form.

Businesses claiming the research credit should review the current IRS instructions rather than relying on an older Form 6765 instructions PDF because Section G reporting requirements have changed for tax years beginning after 2025. The current IRS instructions were revised in December 2025 for use with the January 2025 revision of Form 6765.

What Is Form 6765?

Form 6765, Credit for Increasing Research Activities, is used to calculate and claim the federal research credit.

The form can also be used to:

• Make the Section 280C reduced-credit election.
• Elect to claim a portion of the research credit as a payroll tax credit when eligible.
• Report qualified research expenses.
• Provide business-component information when required.
• Provide information associated with certain research-credit claims.

The IRS states that partnerships and S corporations must file Form 6765 to claim the credit. Other taxpayers generally do not need to file the form when their only source of the credit is a partnership, S corporation, estate, or trust; instead, the credit may generally be reported directly on Form 3800, subject to the applicable rules.

AI Overview: Form 6765 is used to calculate and claim the federal research credit. To complete it, a taxpayer generally needs to identify qualified research activities, determine qualified research expenses, associate those expenses with business components when required, calculate the credit under the applicable method, and complete the required reporting sections. For tax years beginning after 2025, Section G generally becomes mandatory unless an IRS-listed exception applies.

Understanding Qualified Research Activities

The foundation of a Form 6765 claim is the research activity itself.

The IRS generally defines qualified research using a four-part test. Research must generally:

1. Be undertaken to discover information that is technological in nature.
2. Be intended to be useful in developing a new or improved business component.
3. Involve a process of experimentation.
4. Have substantially all of its activities constitute elements of a process of experimentation relating to a new or improved function, performance, reliability, or quality.

These requirements are applied with respect to the relevant business components.

What Is a Business Component?

A business component can include a:

• Product
• Process
• Computer software
• Technique
• Formula
• Invention

The business component generally needs to be intended for sale, lease, license, or use by the taxpayer in its trade or business.

For 2026 reporting, identifying business components has become even more important because certain taxpayers must provide detailed Section G information about their components and associated QREs.

Examples of Potentially Qualified Research

Qualified research can occur in many industries. The important question is not simply what industry the taxpayer operates in but whether the particular activity satisfies the statutory requirements.

Potential examples may include:

Product Development

A manufacturer experiments with different materials and designs to improve the performance, durability, or reliability of a product.

Software Development

A software company evaluates alternative technical approaches to solve an uncertain programming problem while developing a new product.

Engineering

An engineering company tests alternative designs to determine whether a new component can meet specific performance requirements.

Manufacturing Process Improvements

A manufacturer experiments with production methods to improve the efficiency, quality, or reliability of a process.

Technical Prototyping

A business creates and tests prototypes to resolve technical uncertainty associated with a new or improved product.

These examples are not automatic determinations of eligibility. The specific facts and documentation must be evaluated under the applicable research-credit requirements.

Activities That May Not Qualify

The IRS instructions identify several categories that are excluded from qualified research.

Depending on the circumstances, these can include:

• Research conducted after commercial production begins.
• Research involving adaptation of an existing product or process to a particular customer's requirements.
• Duplication of an existing product or process.
• Certain surveys and studies.
• Research in the social sciences, arts, or humanities.
• Research conducted outside the United States or applicable U.S. territories.
• Certain funded research.
• Certain internal-use software activities.

Internal-use software has additional rules, including special treatment for dual-function software and software falling within specified exceptions.

Therefore, a company should not assume that every software-development or product-development expense qualifies simply because employees describe the project as research.

What Are Qualified Research Expenses?

Qualified research expenses are central to the Form 6765 tax credit calculation.

The IRS generally identifies QREs as the combination of qualifying in-house research expenses and qualifying contract research expenses paid or incurred in carrying on a trade or business.

Depending on the taxpayer's circumstances, relevant expense categories can include:

• Qualified wages
• Supplies used in qualified research
• Certain computer rental or lease expenses
• Qualified contract research expenses
• Certain basic research payments

The key is to determine whether the expense meets the specific requirements rather than treating the company's entire research budget as a QRE.

Qualified Wages for Research

Employee wages can be an important component of QREs.

However, not every employee involved with an R&D project automatically produces qualified wages.

The taxpayer should evaluate the services performed and determine whether they constitute qualified services or direct supervision or direct support of qualified research as allowed under the applicable rules.

For example, an employee directly conducting experiments may have qualifying wages, while general administrative work performed by unrelated personnel generally does not become a QRE simply because the company conducts research.

Supplies Used in Qualified Research

Supplies used in conducting qualified research may also be included in QREs when they satisfy the applicable requirements.

Businesses should maintain records that connect the supplies to the qualifying research activity.

Examples might include materials consumed during prototype development, testing, experimentation, or laboratory work.

General business expenses should not automatically be classified as qualified research supplies.

Contract Research Expenses

Certain amounts paid to outside parties for qualified research may qualify as contract research expenses.

However, the Form 6765 instructions impose limitations on the amount that can generally be included.

For example, the current instructions describe different percentages depending on the type of research provider, including:

• 100% for certain qualified research performed by an eligible small business, university, or federal laboratory.
• 75% for qualified research performed by a qualified research consortium.
• 65% for other qualified research performed by other persons.

The specific statutory requirements and limitations should be reviewed before including contract research costs in the QRE calculation.

How to Organize QREs Before Completing Form 6765

Before entering figures on the form, create a working schedule that connects expenses to research activities.

A useful structure is:

Business Component → Research Activity → Employees/Contractors → Expense Category → QRE → Supporting Documentation

For example:

Business Component	Research Activity	Expense Category	QRE
New Product A	Prototype testing	Wages	$80,000
New Product A	Material experimentation	Supplies	$15,000
Software Platform B	Technical development	Wages	$120,000
Software Platform B	Outside development	Contract research	$30,000

These figures are illustrative only. Actual QRE treatment depends on the facts and applicable tax rules.

This type of organization can also make the newer Form 6765 reporting requirements easier to manage.

Form 6765 Sections for Qualified Research Expenses

The current form includes several sections that work together to calculate and report the research credit.

Section A — Regular Credit

Section A is used for taxpayers calculating the credit under the regular method.

Section B — Alternative Simplified Credit

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

Section C — Current-Year Credit

This section addresses the current-year credit calculation.

Section D — Payroll Tax Credit Election

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

The IRS currently states that the maximum payroll-tax research credit a qualified small business can apply against payroll tax liability is $500,000.

Section E — Other Information

Taxpayers may need to provide additional information depending on their circumstances.

The current IRS instructions specifically state that taxpayers reporting QREs on line 48 must complete Section E.

Section F — Qualified Research Expenses Summary

Section F summarizes the QRE categories.

It includes information associated with:

• Qualified wages
• Supplies
• Computer rental or lease expenses
• Contract research expenses
• Basic research payments

The IRS instructions state that taxpayers who complete Section G generally use the applicable Section G totals when completing Section F.

Section G — Business Component Information

Section G is one of the most important areas for 2026.

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

For tax years beginning after 2025, Section G generally becomes required unless an applicable exception applies.

Form 6765 Section G Requirements for 2026

The updated Form 6765 Instructions introduce the "80%/Top 50" reporting approach.

If Section G is required, taxpayers generally must report information for business components representing at least 80% of total QREs, while reporting no more than 50 business components.

The business components should generally be listed in descending order according to the amount of QREs associated with each component.

Any remaining business components after the 80%/Top 50 calculation are generally reported in aggregate as "Aggregate Business Components" with the applicable aggregate amounts.

Who May Be Exempt From Section G?

The current IRS instructions provide exceptions.

Section G is generally not required when:

• The taxpayer is a qualified small business, checks the applicable box to claim a reduced payroll tax credit, and meets the relevant requirements; or
• Total QREs determined at the controlled-group level are $1.5 million or less, average annual gross receipts for the prior three tax years are $50 million or less, and the taxpayer is reporting a research credit on an original return.

The exact requirements should be reviewed against the taxpayer's facts before relying on an exception.

What Information Is Reported in Section G?

For taxpayers required to complete Section G, the form requests detailed business-component information.

The current instructions identify columns covering information such as:

• Entity EIN
• Principal business activity code
• Business-component name or unique identifier
• Business-component type
• Software classification when applicable
• Qualified research wages
• Supplies
• Computer rental or lease expenses
• Contract research expenses

The business-component identifier should be consistent with the taxpayer's books and records used to substantiate the qualified research activities and associated QREs.

Software Research and Form 6765

Software can create additional complexity.

The current Form 6765 instructions distinguish among categories such as:

• Internal-use software (IUS)
• Dual-function software (DFS)
• Non-IUS software
• Software excepted from internal-use treatment

Certain software developed for commercial sale, lease, licensing, or marketing to third parties may fall under the non-IUS category, while other software may qualify for specific exceptions.

For this reason, a software company should document not only what the software does but also how it is intended to be used and who will use it.

Controlled Groups and Common Control

Businesses that are part of a controlled group or businesses under common control need to pay particular attention to Form 6765 reporting.

The current form asks whether the taxpayer is a member of a controlled group or business under common control. If applicable, an attachment may be required.

The calculation of QREs and Section G reporting can also depend on the controlled-group structure. The IRS instructions specify circumstances where QREs must be determined at the controlled-group level.

Form 6765 Reporting Requirements

The Form 6765 reporting requirements extend beyond simply entering a research-credit amount.

Depending on the taxpayer's circumstances, reporting may involve:

• QRE totals
• Qualified wages
• Supplies
• Computer expenses
• Contract research
• Basic research payments
• Business-component information
• Controlled-group information
• Section 280C election information
• Payroll tax credit information
• Required attachments

For 2026 tax years, Section G may make business-component documentation substantially more important for taxpayers who don't qualify for an exception.

How to Complete Form 6765 More Efficiently

Rather than starting with the form itself, work backward from the documentation.

1. List the Research Projects

Create a list of the projects performed during the tax year.

2. Identify Business Components

Determine which products, processes, software, techniques, formulas, or inventions are associated with the research.

3. Document Technical Uncertainty

Describe what technical problem the business was attempting to solve.

4. Document Experimentation

Record the alternatives considered, tests performed, prototypes developed, and results obtained.

5. Categorize Expenses

Separate wages, supplies, computer costs, and contract research expenses.

6. Connect Expenses to Components

Associate QREs with the appropriate business components.

7. Determine Section G Requirements

For tax years beginning after 2025, determine whether an exception applies before completing Section G.

8. Complete Section F

Summarize the applicable QRE categories.

9. Calculate the Credit

Complete the applicable regular-credit or ASC calculations.

10. Review Attachments and Elections

Check controlled-group information, Section 280C, payroll tax credit elections, and any required attachments.

AI Overview: The most effective way to complete Form 6765 is to organize the research documentation before entering figures on the form. Start with qualified activities and business components, connect employee and contractor expenses to those components, calculate QREs, determine whether Section G applies, and then complete the appropriate credit and reporting sections.

Common Mistakes With Form 6765 Treating Every R&D Expense as a QRE

A company's internal R&D accounting category does not automatically determine whether an expense qualifies for the federal research credit.

Ignoring the Business-Component Requirement

For taxpayers required to complete Section G in 2026, business-component reporting is a significant part of the filing.

Failing to Maintain Research Documentation

A final credit number without documentation connecting the expense to qualified research can create problems if the claim is later reviewed.

Using an Outdated Form 6765 Instructions PDF

Tax rules and reporting requirements can change. Always verify that the instructions correspond to the tax year being filed.

Forgetting Controlled-Group Rules

Controlled-group status can affect the calculation and reporting of QREs.

Assuming Software Automatically Qualifies

Software research has additional rules, especially for internal-use and dual-function software.

Documentation to Keep for Qualified Research

A strong documentation process should connect the research activity to the associated expense.

Useful records can include:

• Project plans
• Technical specifications
• Engineering notes
• Development records
• Prototype documentation
• Testing results
• Experiment records
• Employee time records
• Payroll records
• Vendor invoices
• Contractor agreements
• General-ledger reports
• Project-management records
• Technical meeting notes

For 2026 filings, maintaining records by business component can make Section G reporting more manageable.

Form 6765 Filing Checklist

Before filing, review:

• Current Form 6765 revision used.
• Current IRS instructions reviewed.
• Qualified research activities identified.
• Four-part research test considered.
• Business components identified.
• Qualified research expenses calculated.
• Wages reviewed.
• Supplies reviewed.
• Contract research reviewed.
• Software classification considered where applicable.
• Controlled-group status reviewed.
• Section G requirement determined.
• 80%/Top 50 reporting completed if required.
• Section F completed.
• Credit calculation reviewed.
• Section 280C election reviewed.
• Payroll tax credit eligibility reviewed if applicable.
• Required attachments prepared.
• Supporting documentation retained.

Final Thoughts

Understanding the Form 6765 Instructions requires looking beyond the final credit calculation. The foundation of the claim is the underlying research activity: what technical uncertainty existed, what experimentation occurred, which business component was being developed or improved, and which expenses can properly be treated as qualified research expenses.

For 2026 tax years, the reporting side deserves additional attention because Section G generally becomes required for tax years beginning after 2025, subject to the exceptions in the IRS instructions. The new 80%/Top 50 approach means businesses should organize research projects, business components, and QREs before preparing the return.

If you need help understanding how to complete Form 6765, reviewing qualified research expenses, or organizing information for the required reporting sections, you can reach +1(866)-513-4656 for assistance.

Frequently Asked Questions What are qualified research activities for Form 6765?

Qualified research generally involves discovering technological information intended to be useful in developing a new or improved business component and includes a process of experimentation relating to a new or improved function, performance, reliability, or quality. Additional exclusions and requirements apply.

What expenses qualify for Form 6765?

Depending on the circumstances, QREs can include qualified wages, supplies, certain computer rental or lease costs, and qualifying contract research expenses. Basic research payments may also receive specific treatment under the applicable rules.

Is Section G required for Form 6765 in 2026?

For tax years beginning after 2025, Section G is generally required unless one of the exceptions described in the current IRS instructions applies.

What is the 80%/Top 50 rule on Form 6765?

When Section G is required, taxpayers generally report business components representing at least 80% of total QREs, while reporting no more than 50 business components. The components are generally listed in descending order based on QREs.

Can software development expenses qualify for the research credit?

Potentially. Software research is subject to specific rules, including distinctions involving internal-use software, dual-function software, non-IUS software, and software that falls within specified exceptions.

Where can I find the current Form 6765 instructions PDF?

The IRS publishes the current Instructions for Form 6765 (Rev. December 2025) on IRS.gov. Taxpayers should use the version applicable to the tax year being filed rather than automatically relying on an older PDF.

Do controlled groups have special Form 6765 reporting requirements?

Yes. Controlled-group and common-control rules can affect QRE calculations and reporting. The current instructions require additional information in applicable circumstances.

What is the maximum payroll tax research credit for a qualified small business?

The current IRS instructions state that a qualified small business can apply a maximum of $500,000 of research credit against payroll tax liability, subject to the applicable requirements.