Surgent's OBBBA Rules Relating to Research and Experimental Expenditures

Overview

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.

Highlights

• 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

Prerequisites

None

Designed For

Accounting and finance professionals who will be advising clients regarding R&E expenses

Objectives

• Explain the new OBBBA rules relating to this important topic
• Take advantage of R&E tax savings

Preparation

None