Posted by Robert Bryant, Esq., CPA on 10.02.26
Businesses investing in innovation may have new opportunities to reduce their tax burden thanks to recent enhancements to Research & Development (R&D) tax credit programs in Connecticut and New Hampshire. These state-level incentives can provide valuable tax savings for companies engaged in developing new products, improving processes, creating software, or advancing technology.
Connecticut Creates New 6% R&D Tax Credit for Small Businesses
Effective for tax years beginning on or after January 1, 2026, Connecticut has expanded its R&D
tax credit program to include eligible small businesses. The new credit equals 6% of qualified research and development expenditures incurred within the state.
Eligible taxpayers include:
• S corporations
• Partnerships and entities treated as partnerships for federal tax purposes
• Single-member LLCs treated as disregarded entities
Connecticut generally follows federal R&D credit guidelines, meaning many expenses that
qualify for the federal research credit may also qualify for the state credit.
One of the most beneficial features of the new program is its refundability. If the credit exceeds a taxpayer's Connecticut income tax liability, eligible businesses may exchange the excess credit for a partial cash refund. Qualified biotechnology companies may receive up to 90% of excess credits as a refund, while other qualifying small businesses may receive up to 65%. The credit is administered through a voucher program overseen by the Connecticut Department of Economic and Community Development (DECD). Businesses must verify eligible
expenditures within 90 days after the close of the taxable year. Because the program is subject to a $25 million annual cap, timely filing is critical.
New Hampshire Increases Available R&D Credits
New Hampshire has also strengthened its R&D tax credit program by increasing both the statewide credit pool and the maximum credit available to individual taxpayers. For 2026, the statewide annual cap increased from $7 million to $10 million, and the maximum credit available to a taxpayer increased from $50,000 to $100,000. These changes provide greater opportunities for qualifying businesses to benefit from research-related investments.
The New Hampshire credit generally applies to qualified manufacturing and research activities that meet federal R&D credit requirements. Businesses must submit their applications by June 30 following the tax year in which the research activities occurred. The New Hampshire Department of Revenue Administration allocates credits annually, and awards may be prorated if applications exceed available funding.
Why Businesses Should Pay Attention
Many companies focus on the federal R&D tax credit and overlook valuable state incentives.
With Connecticut introducing a new credit for small businesses and New Hampshire expanding
its existing program, businesses may be able to significantly reduce the after-tax cost of innovation while improving cash flow. Companies involved in product development, software design, engineering, manufacturing
improvements, or process enhancements should consider evaluating their eligibility for both federal and state R&D incentives.
How Tax Point Advisors Can Help
Identifying qualifying activities, documenting eligible expenses, and navigating state-specific filing requirements can be challenging. Tax Point Advisors helps businesses maximize available R&D tax credits by identifying qualifying research activities, calculating eligible expenditures, and ensuring compliance with federal and state requirements. If your business operates in Connecticut or New Hampshire, contact Tax Point Advisors to learn
how these new R&D tax credit opportunities could benefit your company.
