R&D (Expensing + Credit)
Immediate Expensing is Back (Section 174A)
R&D tax planning is now a front-office growth lever again, not just a compliance exercise. With domestic R&D expensing restored for tax years beginning after Dec. 31, 2024, businesses have a renewed opportunity to improve cash flow, reduce current tax liability and re-greenlight innovation initiatives that were previously paused.
R&D Frequently Asked Questions
The One Big Beautiful Bill (OBBB) restored the ability to immediately expense domestic R&D for tax years beginning after Dec. 31, 2024. Taxpayers can also elect to capitalize and amortize the costs over at least 60 months, subject to election rules.
No. Foreign R&D is still amortized over 15 years, making where the work happens more consequential.
Taxpayers may elect either:
- To deduct remaining unamortized domestic R&D costs from 2022–2024 entirely in the first tax year beginning after Dec. 31, 2024, or
- To deduct them ratably over 2025 and 2026.
Potentially. Eligible small businesses (average gross receipts ≤ $31M for the three years before the first taxable year after Dec. 31, 2024) may apply the new rules retroactively for 2022–2024 by filing amended returns, which may unlock refunds.
Yes. Software development continues to be treated as R&D under Section 174A, and domestic software R&D costs may qualify for immediate expensing or amortization.
Yes. Section 41 R&D credit remains unchanged, but deductions and credits need to be coordinated to avoid “double benefits” under Section 280C.
Farmers and manufacturers can qualify by improving products, processes or production methods, and encourages businesses to revisit projects that were paused due to prior tax friction
Action steps include: model expensing vs. amortization, evaluate transition relief and retroactivity eligibility, tighten documentation, review state conformity and coordinate your approach if claiming the R&D credit
If you’re investing in process improvement, software, product innovation or operational experimentation, Adams Brown can map your R&D activity to documentation standards, model the cash-flow impact and coordinate the deduction + credit strategy end-to-end