201–210 of 991 posts
As a non-American, it seems strange to me that the cost of regular software development, i.e. that is neither “research” nor “experimental” in a conventional sense, would be deductible in the first place (amortized or not). Isn’t that subsidizing a whole business sector? Maybe I’m misunderstanding something.
There are some misunderstandings in the comments that seem to stem from not having read the section, so I thought it was worth referencing the actual text [0]. It's quite short and easy to read. The most important bits: * Subsection (a) requires amortizing "Specified research or experimental expenditures" over 5 years (paragraph (2)) instead of deducting them (paragraph (1)) * Paragraph (c)(3) is a Special Rule that…
Amortization is bad policy when it comes software. Software is inherently high risk. Every piece of software is unique and does not guarantee steady income over 5 years. Most startups won't survive 5 years to fully realize the deductions. This is the end of US software dominance.
Is US software dominance because of our startups? Or because of the giant trillion dollar monopolies we have? Didn't AAPL, GOOG and FB all create products _before_ they had any taxable income? Would this change have had any actual impact on their foundings?
Is there a flaw in saying, "salaries should always be considered a business expense and cannot be amortized over many years." ?
After that, we can nitpick: should the development costs of new software be encouraged the same as maintenance costs of existing software. If you want to encourage startups, then yes they should. If you want to discourage startups or very temporarily increase tax collection, then no.
As a non-American, it seems strange to me that the cost of regular software development, i.e. that is neither “research” nor “experimental” in a conventional sense, would be deductible in the first place (amortized or not). Isn’t that subsidizing a whole business sector? Maybe I’m misunderstanding something.
Most businesses let you deduct inputs and capital expenses from your revenue so that tax only applies to profit. Since this is done on annual buckets it's very common to try to move items in both columns between years to minimize tax.
As a non-American, it seems strange to me that the cost of regular software development, i.e. that is neither “research” nor “experimental” in a conventional sense, would be deductible in the first place (amortized or not). Isn’t that subsidizing a whole business sector? Maybe I’m misunderstanding something.
It’s a fudge to make projections look better to allow congress to pass a budget neutral reconciliation bill with the intent that congress would remove the fudge before the consequences triggered.
Governments in general are pushing for capital gains tax normalization where instead of requiring a taxation event the capital gains tax would be levied yearly. In such a scenario the only difference remaining would stem from the difference taxation rates.
Earlier quoted context omitted.
Here's a toy example that hopefully makes this clear: In 2024, your business has $1m in revenue and has $2m in expenses. 100% of these expenses are R&D salaries (engineers you hire.) Your company loses $1m/year. (You brought in $1m and spent $2m.) Under the old rules, you'd owe no tax because you were unprofitable. After Sec 174, what the IRS now says is: You had revenues of $1m. But you only had $400k in expenses (b…
Wait - they are saying that employee salaries are not expenses? That is surely wrong? Just because those salaries are for R&D? I could understand if there was some additional tax break for R&D which was being removed. I can't see how basic operating costs cease to be expenses.
Why is this the first we’re hearing about this, three years in? The article says these companies blamed other factors for the layoffs - why?
Earlier quoted context omitted.
I don't understand how that is a subsidy, are the people paying the employer? The employer makes less profit due to salaries, but they won't "lose less" or make more money due to salaries. Under that argument, the government would have a direct incentive to dictate how businesses do business to maximize taxable revenue.
Tax subsidies are when the government taxes you less, thereby reducing your tax burden. You don't receive funds, you just owe less.
Earlier quoted context omitted.
Here's a toy example that hopefully makes this clear: In 2024, your business has $1m in revenue and has $2m in expenses. 100% of these expenses are R&D salaries (engineers you hire.) Your company loses $1m/year. (You brought in $1m and spent $2m.) Under the old rules, you'd owe no tax because you were unprofitable. After Sec 174, what the IRS now says is: You had revenues of $1m. But you only had $400k in expenses (b…
Wait - they are saying that employee salaries are not expenses? That is surely wrong? Just because those salaries are for R&D? I could understand if there was some additional tax break for R&D which was being removed. I can't see how basic operating costs cease to be expenses.