The new tax bill is through and signed. Here are the highlights for R&D:
For tax year 2025, the R&E expenditures (Section 174 deduction/amortization rules) have been fixed. No taxpayer has to argue or worry about what could be categorized as R&E and be placed onto a 5 year amortization schedule for TY 2025 and moving forward.
For certain small businesses (under $31 million in average annual gross receipts), you can RETROACTIVELY put those amortized costs back into your expenses column. This is a big beautiful fix for many taxpayers, who can now amend TY 2021, TY 2022, TY 2023, and TY 2024 to go back to the historical way.
Accelerate the schedule for other businesses: If your business is over the threshold to amend and expense the R&E expenditures, you can accelerate your amortization schedule on TY 2025’s return. This catch up can be done over one or two years, depending on what makes the most sense for you.
Payroll R&D credit raised from $250k to $500k maximum.
Option to amortize these expenditures remains available.
Fix is considered permanent, as in, there is no automatic expiration date or sunset clause.
This should be considered a “win” for taxpayers using R&D tax credits. There is no longer any ambiguity regarding primacy of provisions because the provisions are not in conflict as to what treatments and categorizations are allowed.
To sum up in Trump tweet style:
R&D Tax Credits are BACK !! If you can claim a credit, YOU SHOULD DO IT. BIG WIN for taxpayers, SAVE MONEY and REINVEST BIGLY.
Side note: I would like to thank Rep. Chip Roy and his office (Hal especially, and Hannah, and John) for taking our calls and emails and learning the relevant information. We know this provision was only one of many things discussed in D.C., and that tax policy is boring and complex. Talking about phantom income, revenue-to-expense matching, and the costs of legal uncertainty are not the most thrilling topics. A big shout out to their whole team for serving the people here at home.