Fellow American Business Owners,
As someone who's spent the last 25+ years helping companies like yours maximize their R&D efforts, I want to have a straight talk about some potential major changes that could affect your bottom line.
The Big News for American Business
Let me cut to the chase - with the recent political shift in Washington, we're looking at what could be the biggest shake-up in R&D tax treatment since the Tax Cuts and Jobs Act. As a business owner, I know how these changes can impact your long-term planning.
Where We Stand Today (And Why It Matters to Your Business)
Right now, if you're investing in research and development, including performing any software development), you're dealing with:
- 5-year amortization for domestic research costs
- 15-year amortization for foreign research
- No option for immediate expense write-offs
Translation; your cash flow isn't what it could be. I've seen countless American businesses, from tech startups to manufacturing veterans, wrestling with these restrictions.
The Political Landscape
When the Tax Cuts and Jobs Act first implemented these amortization rules back in 2017, there was bipartisan support. However, with the new Republican majority in Congress and the White House, there's a good chance these rules could be revisited.
In fact, earlier this year, a bill was introduced in the Senate to restore the option for immediate expensing of R&D costs. Unfortunately, with the Democratic majority at the time, the bill stalled in committee.
But with the tables turned and Republicans now controlling both chambers, the path to reform is much clearer.
The Political Landscape
When the Tax Cuts and Jobs Act first implemented these amortization rules back in 2017, there was bipartisan support. However, with the new Republican majority in Congress and the White House, there's a good chance these rules could be revisited.
In fact, earlier this year, a bill was introduced in the Senate to restore the option for immediate expensing of R&D costs. Unfortunately, with the Democratic majority at the time, the bill stalled in committee.
But with the tables turned and Republicans now controlling both chambers, the path to reform is much clearer.
Do This Now:
- ✓ Review your current R&D spending patterns
- ✓ Document your R&D initiatives, products and projects along with the associated staff, contractors, supplies, and the related expenses for each (trust me, this will save you headaches later)
- ✓ Start planning for potential changes, including a retroactive reversion of Section 174
- ✓ Consider timing of major R&D investments
Avoid These Mistakes:
- ✗ Don't halt current R&D initiatives
- ✗ Don't make assumptions about immediate changes
- ✗ Don't neglect current compliance requirements
Real Talk: What This Means for American Innovation
Let's be honest - America's global leadership in innovation isn't just about big tech companies. It's about businesses like yours: the manufacturers developing better processes, the software companies creating new solutions, and the countless other innovators driving our economy forward.
Your Next Steps
While Washington works through the details, smart business owners should be:
- Staying informed about policy changes
- Consulting with R&D tax experts
- Planning for multiple scenarios
- Keeping detailed records of all R&D activities
We are optimistic that small businesses will benefit from tax code changes in 2025 and will receive the tax relief they deserve. Since 1954, American businesses had been allowed to deduct R&D expenses in the year incurred, leveling the field and encouraging innovation.
We're Here to Help
At Strike Tax Advisory, we've helped hundreds of American businesses navigate tax changes while maximizing their R&D benefits. We know what works, what doesn't, and most importantly, how to protect your interests while staying completely compliant.
The Bottom Line
Change is coming, and it could be a game-changer for American business owners. While nothing's set in stone yet, the smart play is to start preparing now. Want to know exactly how these changes might affect your business? Visit us at www.striketax.com for a free consultation.
