Immediate expensing is back for U.S. research
The 2025 tax law (the One Big Beautiful Bill Act) restored immediate deductions for domestic research and experimental (R&E) costs, starting with tax years beginning after December 31, 2024. Here’s what changed — and what it may mean for your business.
At a glance
- Domestic R&E: deductible in the year paid or incurred (new Section 174A), for tax years beginning after 2024
- Foreign R&E: still capitalized and amortized over 15 years
- Unamortized 2022–2024 domestic costs: you may be able to deduct them faster
- Software development costs are treated as R&E
How the rules have shifted
Through 2021Deduct or elect
Businesses could deduct R&E costs currently or elect to capitalize and amortize them.
2022 – 2024Required amortization
Under the 2017 Tax Cuts and Jobs Act, R&E costs had to be capitalized and amortized:
- 5 years for U.S. research
- 15 years for foreign research
2025 onwardDomestic expensing restored
For tax years beginning after December 31, 2024:
- You can deduct U.S. research immediately (or elect to amortize)
- Foreign research remains on 15-year amortization
Key considerations
Leftover 2022–2024 costs
Businesses may elect to deduct the remaining unamortized domestic R&E from 2022–2024 all in the first tax year beginning after 2024, or spread it over two years — instead of continuing the original schedule.
Small business retroactive relief
Eligible small businesses (average annual gross receipts of about $31 million or less) could elect to apply expensing retroactively to 2022–2024 by amending returns. That election window generally closed July 6, 2026 — ask us what options may still apply to you.
Foreign research
You must still capitalize and amortize research performed outside the U.S. over 15 years, so tracking where the work happens still matters.
R&D tax credit (Section 41)
Costs that qualify for the R&D credit are a narrower subset of Section 174 costs. Claiming the credit can affect your deduction, so plan the two together.
R&D tax credit →This page is general information, not tax advice. How these rules apply depends on your facts — talk with our team before making any election.
A simple two-step process
1. Onboarding
Schedule a consultation with our specialists, and we’ll set up a member portal for you to track your R&D activities.
Schedule a call →2. Study & filing
Update your details on our platform. Our CPA works with you on your R&E costs and credits, and our tax team prepares your return.
Talk with us about Section 174
Find out how the new rules affect your R&D costs, your credit and your tax bill.
Monday–Friday, 9 am–6 pm Pacific