The One Big Beautiful Bill Act (signed July 4, 2025) added IRC Section 174A, permanently restoring immediate expensing of domestic research and experimental costs for tax years beginning after December 31, 2024. IRS Rev. Proc. 2025-28 (Aug 28, 2025) sets the procedures; small business taxpayers (average annual gross receipts of $31M or less) could also elect retroactive expensing back to 2022. Foreign R&D must still be capitalized and amortized over 15 years.
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Startups can again fully deduct US R&D costs in the year incurred (Section 174A)
Why this matters for founders
Software and product startups should now deduct 100% of US engineering/R&D spend in-year instead of amortizing it, cutting current taxable income and freeing cash. Confirm the Section 174A method election with your CPA (the separate small-business retroactive-amendment window closed July 6, 2026).
Source: IRS Internal Revenue Bulletin 2025-38 (Rev. Proc. 2025-28)
SaaS / SoftwareEnterprise SoftwareFintechHealthtechHardware / IoT #section-174#r-and-d-expensing#obbba#taxes#finance#operations
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