Section 174 now requires all software companies filing taxes in the US to capitalise and amortise their R&D expenses.
Established in 1954, Section 174 outlines the guidelines for businesses when it comes to deducting research and experimental (R&E) expenditures. Initially, businesses could promptly deduct their research and development costs, encouraging robust engagement in activities aimed at performance enhancement and product development.
Yet, recent revisions have introduced a layer of intricacy to this framework. As of December 31, 2021, a new mandate requires businesses to amortise all R&D expenses over five years. This amortisation period extends to 15 years for expenses linked to foreign research initiatives.
To facilitate estimation, our calculator operates under the following assumptions: