Illinois R&D Tax Credit Explained for Businesses

Illinois and the R&D Tax Credit

State Credit Name: The Illinois Research and Development Credit (1299-D, lines 24-33)

Expiration Date: December 31, 2021

Who Can Apply? Corporations and Flow-through entities

Credit Carry Forward: Unused credit can be carried forward up to 5 years.

About the Credit: A non-refundable credit of 6.5% of the QRE’s for qualifying research activities performed in Illinois.

Are you eligible?

Why choose us?

Pass an Audit?

Special Notes: The Illinois R&D credit is generated from qualified research activities (QRAs) performed within the state. Qualifying activities are defined in Section 41 of the Internal Revenue Code as “a new or improved function, performance, or reliability or quality.”

Process improvement activities include:

Identifying uncertainty concerning the development or improvement of a business component;
Identifying one or more alternatives intended to eliminate that uncertainty; and
Identifying and conducting a process of evaluating the alternatives (e.g., through modeling, simulation, or a systematic trial-and-error methodology).

The R&D Tax Credit is a credit that is available across various industries, such as:

Agriculture
Automotive
Aviation
Biotechnology
Engineering
Farming
Food and Beverage
Logistics
Manufacturing
Oil and Gas
Software
Transportation

Find out more

Swanson Reed is one of the only companies in the United States to exclusively focus on R&D tax credit preparation. Swanson Reed’s office location at 318 West Adams Street, Chicago, Illinois provides R&D tax credit consulting and advisory services to Chicago, Aurora, Rockford, Joliet, Naperville, Springfield, Peoria, Elgin, Waukegan, Champaign, Bloomington, Decatur, Evanston, Des Plaines, Berwyn, Wheaton, Carbondale, Mount Prospect, Oak Lawn and Skokie.

If you have any questions or need further assistance, please call or email our local Illinois Partner on (312) 380-0467.
Feel free to book a quick teleconference with one of our Illinois R&D tax credit specialists at a time that is convenient for you. Click here for more information about R&D tax credit management and implementation.

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Illinois R&D Tax Credit Filing Instructions

To claim the Research and Development (R&D) tax credit in Illinois, businesses must engage in qualified research activities as defined under Section 41 of the Internal Revenue Code, specifically those performed within the state. The Illinois R&D credit is a nonrefundable credit equal to 6.5% of the qualifying expenditures that exceed a base amount, which is the average of the qualifying research expenditures (QREs) for the three preceding taxable years. These qualifying expenditures typically include wages for qualified services, the cost of supplies, and rental or lease costs of computers, as well as contract research expenses.

Businesses must file Illinois Schedule 1299-D, Income Tax Credits (for corporations and fiduciaries), or Schedule 1299-A, Tax Subtractions and Credits for Partnerships and S Corporations, depending on their entity type. This schedule must be attached to their appropriate Illinois tax return, such as Form IL-1120 (for corporations), Form IL-1041 (for fiduciaries), or Form IL-990-T (for unrelated business income tax). Unused credits can generally be carried forward for up to five years. It’s essential for businesses to maintain thorough documentation of their R&D activities and expenses to support their claim in the event of an audit.