If you received a research credit on a Schedule K-1 from a partnership, S corporation, or estate or trust, you may be able to claim your share of the Credit for Increasing Research Activities on your individual tax return.
In the program, enter the credit by following these steps:
- Go to Federal.
- Select Deductions (or Select My Forms, depending on your version).
- Choose Credits.
- Select Credit for Increasing Research Activities from Pass-through Entities (Form 6765).
Who Can Report This Credit?
You may be eligible to report this credit if your Schedule K-1 includes one of the following codes:
- Schedule K-1 (Form 1065): Line 15, Code M
- Schedule K-1 (Form 1041): Line 13, Code I
- Schedule K-1 (Form 1120-S): Line 13, Code M
These codes indicate that a pass-through entity has allocated a portion of its research credit to you.
What Is the Credit for Increasing Research Activities?
The Credit for Increasing Research Activities is generally available for qualified research expenses paid or incurred while developing or improving products, processes, techniques, formulas, software, or similar business components.
To qualify, the research generally must:
- Be technological in nature.
- Seek to discover information intended to eliminate uncertainty.
- Support the development of a new or improved business component.
- Meet IRS requirements for qualified research activities.
Because partnerships, S corporations, and certain trusts and estates can pass this credit through to owners and beneficiaries, your share may be reported on your Schedule K-1 rather than claimed directly by the business.
What Information Do I Need?
Before entering the credit, have your Schedule K-1 available. The credit amount and related details should be listed with the applicable line and code on your K-1. If additional information is provided in a supporting statement attached to your K-1, keep it with your tax records in case you need it while completing your return.
Additional Information
You can read more about Form 6765, here.