{"id":43842,"date":"2025-11-03T08:16:05","date_gmt":"2025-11-03T16:16:05","guid":{"rendered":"https:\/\/evergreensmallbusiness.com\/?p=43842"},"modified":"2025-11-04T13:36:37","modified_gmt":"2025-11-04T21:36:37","slug":"one-big-beautiful-bills-new-rd-deductions","status":"publish","type":"post","link":"https:\/\/evergreensmallbusiness.com\/one-big-beautiful-bills-new-rd-deductions\/","title":{"rendered":"One Big Beautiful Bill’s New R&D Deductions"},"content":{"rendered":"

\"R&D<\/a>The OBBB, also known as the One Big Beautiful Bill, also known as the American Innovation and Growth Act of 2025,<\/a> makes a useful change to the R&D deduction rules.<\/p>\n

That change? Businesses may again deduct research and development costs, or R&D costs, as incurred.<\/p>\n

Note:<\/strong> The current law says firms must capitalize R&D costs and then amortize the costs over a number of years.<\/p>\n

But this change is trickier than you might at first guess. Some complexities exist. Also you have some tax planning opportunities related to any existing, capitalized R&D costs your tax return shows.<\/p>\n

In this post, I walk you through the newly restored R&D deduction rules. And then I’ll explain not just how to recover deductions from prior years, but also how to maximize the tax savings you enjoy when you do this.<\/p>\n

But let’s review how we got here.<\/p>\n

R&D Deductions Pre-2022, The Golden Era<\/h2>\n

Prior to January 1, 2022, taxpayers had two primary options for handling R&D expenses:<\/p>\n

    \n
  1. Taxpayers could deduct R&D expenses in the year incurred. This applied to in-house R&D costs and certain contract expenses, and was the most common treatment.<\/li>\n
  2. Alternatively, businesses could elect under \u00a7174(b)<\/a> to amortize R&D over at least 60 months.<\/li>\n<\/ol>\n

    The ability to expense R&D immediately had two tax accounting benefits. First, it reduced a taxpayer’s income which meant it also reduced a taxpayer’s tax burden. Second, it simplified the accounting by avoiding complex capitalization and amortization tracking. Then the rule changed.<\/p>\n

    R&D Deductions 2022 – 2024, The Dark Era<\/h2>\n

    From 12\/31\/2021 through 12\/31\/2024, tax law required taxpayers to capitalize R&D costs. Those costs were amortized over 60 months if domestic R&D and over 180 months if foreign R&D.<\/p>\n

    That all sounds reasonable enough. But some practical observations about the capitalization policy. The policy:<\/p>\n