Posted by Jeffrey Feingold on 03.06.26
Recent changes under the One Big Beautiful Bill Act (OBBBA) are bringing welcome relief to businesses that invest in research and development. Through Section 174A, companies can once again immediately deduct domestic research and development (R&D) expenses incurred after December 31, 2024, reversing the five-year amortization rule that had been in place since 2022.
A Return to Immediate R&D Expensing
Before 2022, businesses could typically deduct R&D costs in the same year they were incurred. However, a previous change to Section 174 required companies to spread domestic R&D expenses over five years and foreign R&D expenses over fifteen years. This significantly increased taxable income for many companies that rely on innovation.
Section 174A restores the ability to fully deduct domestic R&D expenses immediately, improving cash flow and providing a stronger incentive for companies to continue investing in innovation.
Opportunity to Amend Prior Returns
The new law also creates an opportunity for businesses that previously amortized R&D expenses. Taxpayers now have until July 6, 2026 to amend prior year tax returns and potentially recover taxes paid under the five-year amortization rule.
This could result in significant tax refunds or savings for businesses that incurred qualifying research expenses.
Why Working With a Tax Professional Matters
Identifying eligible R&D activities, calculating deductions, and determining whether to amend prior returns can be complex. Many businesses overlook qualifying expenses such as software development, engineering design, prototyping, or process improvements.
Working with a specialized firm like Tax Point Advisors can help businesses properly analyze their R&D activities, prepare amended returns before the deadline, and maximize available deductions under Section 174A. Their expertise ensures companies capture the full benefit of these new tax provisions while staying compliant with IRS requirements.
Section 174A represents a major win for innovative businesses
By restoring immediate deductions for domestic R&D expenses and providing a window to amend prior returns Section 174A represents a major win for innovative businesses. With the July 6, 2026 amendment deadline, businesses should review their past filings now to ensure they don’t miss out on valuable tax savings.
Partnering with experienced professionals like Tax Point Advisors can help businesses navigate these changes and turn innovation investments into meaningful financial benefits.
Tax Point Advisors assists CPAs and their clients in identifying and capturing their maximum federal R&D tax credits, as well as state R&D tax credits. For more information, contact us at (800) 260-4138, or leave us a message below.
