Research and development (R&D) tax breaks are a set of tax incentives intended to attract firms with high research expenditures to the United States. They’ve existed for going on 70 years, but the Tax Cuts and Jobs Act (TCJA) in 2017 changed how they can be expensed.
R&D costs include all costs incidental to research and experimentation in connection with a trade or business, such as pursuing a new patent registration and associated cost, materials, drawings, and salaries. In sum, R&D expenses can make up a large portion of a startup’s overhead.
At the risk of sounding trite: call your lawmakers.
If Congress repeals the amortization requirement, well and good. But all the same, there are some things we can do now to prepare for the possibility of the rule coming into effect.
First, retain a tax professional if you haven’t already. If that is your CFO, great; if not, start talking to a tax attorney now — avoid one-click shops that promise to get you your credits, as they won’t be there when you get audited. If the law remains unchanged, starting in March, estimated tax payments will have to be made without the first year R&D deductions and reflecting amortization.
Prepare to amortize: Inflation may spell doom for R&D tax expensing by Ram Iyer originally published on TechCrunch