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Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

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Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

#41

Post by KerrAvon »

Jabrov wrote: post #11
Salgat wrote: post #6

Maybe we should focus on fixing H1B first?

What's wrong with H-1B?

I'm going to preface this by saying that I support broad liberalization of border controls; immigrants are the backbone of the USA, the engine on which we run, and we should encourage immigration and make it easy for immigrants to settle here. We have the space and resources; anyone who tells you otherwise is lying to you for political gain.

So, that said: H-1B shouldn't exist for software. The point of it is to fill jobs that cannot be filled by an American for some reason; a condition that doesn't exist in software development. Hire immigrants as software engineers, fine. But find a way to do it that isn't bullshit.

Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

#43

Post by gadders »

xnorswap wrote: post #18
wodenokoto wrote: post #4

Other than it’s nice not to have your profession taxed, what is the argument that software development shouldn’t be taxed as opposed to all sorts of other white collar work?

The UK has (had) a tax credit for "Research and Development", intended to be a tax break for genuine R&D, but of course everyone lumped all software development into. The UK eventually put out guidance that business as usual development isn't really "research and development", but afaik there hasn't been a serious crackdown on the practice. It seems kind of absurd to pretend that most work that developers do is pione…

I've been questioned on whether systems I had a hand in would qualify for the R&D credits. Someone not particularly close to it had thought it might, but I explained to our external assessors that it didn't and they agreed with that.

Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

#44

Post by wagwang »

vessenes wrote: post #3

Thanks for working on this guys. The current tax code is fairly crazy: you could spend a few million in salaries, sell 200k of software in a year and possibly owe taxes on that. Even if the company would otherwise be shutting down. The traditional capital asset treatment applied to software leaves a lot to be desired. Some software is a capital asset, but much just isn’t. Or at least should be considered to depreciat…

Isnt this just false? I thought corporate taxes are levied on net income?

Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

#45

Post by andrewmcwatters »

Yes, but with strong exceptions against offshoring software development labor and H-1B abuse.

Both of these problems are rampant. I’ve seen entire shops with underpaid foreign workers and mass layoffs with workers replaced with offshore and nearshore firms.

Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

#46

Post by runako »

wodenokoto wrote: post #4

Other than it’s nice not to have your profession taxed, what is the argument that software development shouldn’t be taxed as opposed to all sorts of other white collar work?

> other white collar work

Some examples of white collar work that builds long-lived assets but where the work isn't required to be amortized over long periods of time:

- marketing collateral development, unless it is done by engineers

- development of standard legal documents like contracts

- development of HR policy

- development of financial processes & associated reporting, unless done by engineers

- art development (e.g. for packaging and other collateral)

- building customer lists, unless it is done through software by engineers

- developing service offerings (e.g. Costco membership)

Software is not fundamentally different than any of these other white-collar assets that are used to build companies, except that it typically requires more ongoing maintenance.

Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

#47

Post by duxup »

This is less on that specific topic and more general: While I enjoy the hacker news forums a great deal, I've no relationship with YC as an org. I am not sure that YC has any particular interest in things that might impact me as an individual contributor in an org as much as it impacts them.

Understandably there's an everyone for themselves aspect here, but that makes these kinds of call to actions a bit hollow to me.

Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

#48

Post by AndriyKunitsyn »

Jabrov wrote: post #11
Salgat wrote: post #6

Maybe we should focus on fixing H1B first?

What's wrong with H-1B?

It's a lottery with ~1/3 winning chance.

I'd say most of foreign devs in the US are actually L-1 that is actually worse because L-1 prohibits the dev from changing jobs unless the dev gets a new visa.

Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

#49

Post by op00to »

stego-tech wrote: post #7

I’m all for reverting that part of the tax code, but only on the condition that it’s inapplicable to H-1B visa or foreign worker salaries/payments, provided that employer pays local taxes in those countries for those roles. Keep good paying jobs in the USA. If we need immigrant labor, give them Green Cards instead of precarity.

> Keep good paying jobs in the USA

Uh oh!

> give them Green Cards instead of precarity

Oh, right, yes! :D You had me for a minute.

Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

#50

Post by toomim »

wagwang wrote: post #40
TimPC wrote: post #24

Earlier quoted context omitted.

Almost all work is tax deductible. This isn't just for software developers and employees still pay taxes. The issue is software development is being classified as research which is one of the few areas where salaries aren't directly deductible but instead need to be deducted in pieces over five years.

> Almost all work is tax deductible What really? How does this work.

Proft = income - expense.

When you pay people to get work done for a business, that paid work is an expense.

You can deduct expenses from your income to calculate your profits.

IIRC the problem is that software development is not being classified as an operating expense, now, but rather a "research" capital expense, and the deductions then have to be amortized over a number of years.

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