The One Big Beautiful Bill Act (OBBBA) made very favorable taxpayer changes to Section 174, which determines the tax treatment of research and experimental (R&E) expenses. OBBBA allowed for the immediate deduction of domestic R&E expenses through the introduction of a new Section 174A and provides mechanisms for transitioning from the recent five-year amortization schedule to an immediate deduction for domestic R&E expenditures. The OBBBA changes offer tax saving opportunities through these R&E expenditures.
Learning Objectives
- Explain the new OBBBA rules relating to this important topic
- Take advantage of R&E tax savings
Major Topics
- Eligible expenses for the credit
- What activities do not qualify for the credit?
- Differences between credit and deduction
- Revenue Procedure 2025-28
- Immediate deductions starting January 1, 2025
- Deducting domestic R&E paid or incurred in tax years beginning after December 31, 2021, and before January 1, 2025
- Making an election to amortize domestic expenditures
- Elections a small business taxpayer can make
- Options for treating previously capitalized expenditures
- Interaction with the research credit
- Changing accounting methods
- Short tax year ending before July 4, 2025
