Key figures
Rhode Island advisory
2026, with sources
The research credit
Rhode Island’s credit for qualified research expenses uses the federal § 41 definitions, limited to research done in Rhode Island, and applies to the excess of qualified research expenses over the base period: 22.5% for the first $25,000 of credit and 16.9% above that. It cannot reduce a year’s tax by more than 50%, or a corporation’s tax below the $400 minimum.
For tax years beginning on or after January 1, 2026, unused credit carries over for 15 years instead of seven. That change matters most to startups: a company that builds credits during several loss years now has time to use them once it is profitable.
Losses and credits on different clocks
Rhode Island lets NOLs carry forward only five years, with no carryback. Combined with the 50% cap on research credits, the result is that a company with long pre-profit years may pay Rhode Island tax sooner than its federal position suggests. Modelling it is straightforward but easy to skip: list the Rhode Island NOL vintages and their expiry years alongside the credit carryforwards.
A Providence medtech startup that loses $1 million a year for six years and then earns $2 million has only the last five years of Rhode Island losses left, and can use research credits for at most half the resulting tax.
Where founders go wrong in Rhode Island
Rhode Island is small enough that founders often treat it as an extension of Massachusetts. It isn’t: its NOL rules, its 1099 rule and its employee-paid disability program all differ from its neighbor’s.
- Assuming 1099s only go to the IRS: from tax year 2025 Rhode Island wants every 1099 over $100.
- Treating SaaS as exempt: vendor-hosted software has been taxable at 7% since October 2018.
- Forgetting the TDI/TCI deduction from employee pay, which payroll must withhold.
- Letting the $50 annual report lapse in the February 1 to May 1 window.
The federal baseline
This page covers what Rhode Island adds. The federal rules underneath it apply here too.
Common questions
Can a pre-profit startup use the Rhode Island research credit?
Only against future tax. The credit can’t reduce a year’s tax by more than 50% or below the $400 minimum, and unused credit carries over. From tax years beginning in 2026 the carryover is 15 years, up from seven, which makes the credit worth more to a company that won’t be profitable soon.
What should we model differently in Rhode Island?
The mismatch between a short NOL life and a long credit life. NOLs expire after five years while research credits now last 15, so a company that expects to be profitable in year seven may find the losses gone and the credits capped at 50% of tax.
Advisory next door
- CTConnecticut advisoryConnecticut lets small companies exchange unused R&D credits for 65% of their value in cash, and offers angel investors a 25% credit. The surtax and NOL cap catch forecasts.
- MAMassachusetts advisoryMassachusetts offers a research credit with a long carryover, a 4% surtax on income over $1,107,750 that a share sale can trigger, and a strict ABC test for contractors.
Founder guides on this
- R&D taxThe R&D tax credit and Section 174A for startupsEngineering salaries can earn a federal R&D credit against payroll tax, and Section 174A lets you deduct US research again. What qualifies, what to track.
- ComplianceFirst-year compliance calendar for a Delaware C-corpDelaware franchise tax, 1099s, the federal return, payroll filings, state annual reports and sales tax: the deadlines a young C-corp misses most, by month.
- RunwayBurn rate and runway: how to calculate them correctlyGross burn, net burn and months of runway, done the way an investor checks them: from cash, averaged, and with the hires you’ve already committed to.
More of the Rhode Island guide
- AccountingAccounting and state tax in Rhode IslandCorporate tax, conformity to federal rules, apportionment and what it does to your books
- ReceivablesReceivables and sales tax in Rhode IslandSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayablesPayables and contractors in Rhode IslandPaying vendors and contractors: 1099 filing, use tax, contractor tests and withholding
- PayrollPayroll taxes and employer rules in Rhode IslandWithholding, unemployment insurance, paid leave, minimum wage and the rules on paydays
- ComplianceCompliance and filings in Rhode IslandRegistering to do business, annual reports, franchise tax and the filing calendar
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.