An ‘Unanticipated’ Interaction
Under the Tax Cuts and Jobs Act, as of 2022 certain R&E expenditures were required to be capitalized and amortized ratably over 5 years (15 years for foreign research) under IRC § 174. The OBBB reversed course, adding IRC § 174A and allowing an immediate deduction for domestic R&E expenditures paid or incurred in 2025 or later.
The OBBB also provided three options for taxpayers with prior domestic R&E expenditures:
- deduct the entire unamortized amount in 2025,
- deduct the unamortized amount ratably over the 2025 and 2026,
- or continue to amortize the costs over the remainder of the original five-year period.
To dig deeper, visit the original article on the Thomson Reuters blog.