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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)

#161

Post by organsnyder »

logifail wrote: post #132
GavinMcG wrote: post #124

Earlier quoted context omitted.

It found it helpful that it was presented that simply. The point isn’t what else is or isn’t deductible, it’s that engineering salaries went from being deductible to being amortized.

Businesses don't get to say they're claiming "$900k in costs" ... it depends on what kind of costs ... EDIT: and in this instance, it depends on what kind of software engineering.

But why is software engineering treated specially, here? Does Disney have to pay taxes on film animators the same way, given that they're developing a capital asset?

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

#162

Post by gnopgnip »

mediaman wrote: post #66

A lot of people don't know what this Section 174 is about, so here's a brief explainer. Normally, when you have expenses, you deduct them off your revenue to find your taxable profit. If you have $1 million in sales, and $900k in costs, you have $100k in profit, and the government taxes you on that profit. Section 174 says you can't do this for software engineers. If you pay a software engineer, that's not "really" a…

Normally when a business spends money producing a valuable asset, it is required to depreciate the cost to acquire the asset over the useful life. If a business pays people to create a new building, that is depreciated over 20 years. Even if it was paid for as salaries of employees, it isn't a special situation unique to software engineering.

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

#164

Post by kogus »

I'm going to be that guy and just say that one of the many many harmful side effects of income taxes is the kind of social engineering power it gives politicians, who are neither qualified nor properly motivated to make good decisions with such tools. Income taxes are an unethical pollution to our society and government.

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

#165

Post by SV_BubbleTime »

andrewl-hn wrote: post #106
Jabrov wrote: post #11

Earlier quoted context omitted.

What's wrong with H-1B?

AFAIK there are a handful of companies that gobble the whole yearly allowance of H1B visas among them. Usual suspects are BigTech and large consulting groups. The later act as intermediaries: they sell worker hours at a higher rate, skimming the difference between their prices and employee's salary. If they were somehow barred from H1B program the H1B visa holders would presumably find better paying jobs elsewhere. H…

Cognizant… we’re importing a ton of labor to make sales force modules work with each other.

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

#166

Post by thaumasiotes »

rgbrgb wrote: post #102
cjbgkagh wrote: post #95

Earlier quoted context omitted.

It wasn't intended to stick, it's a bad idea that was intentionally bad in order to make it easier to reverse.

I don't follow. What is the motivation of doing something intentionally bad to make it easy to reverse?

The other responses have the right idea, but in more detail:

All congressional bills receive an estimate of their budget impact over the next ten years. Whatever happens after ten years doesn't count.

The politics are that a bill should have no budget impact within that ten-year window. As an uncharitable stylized example, you'd propose to start paying random subsidies to constituents immediately in the amount of $200M / year, forever. 8 years out, you also plan to raise taxes on somebody else, someone who would never vote for you in a million years, in the amount of $1B / year, which may or may not fade out after two years. This is a bill with no budget impact.

It doesn't matter, to you, whether that spike in collections for years 9-10 actually happens or not. If you failed at targeting it exclusively to people you hate, you might prefer that it doesn't.

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

#167

Post by vessenes »

sahila wrote: post #108
freeone3000 wrote: post #65

Earlier quoted context omitted.

Salaries are not generally considered “capital” - HR wording aside, you do not own your employees. It’s an immediate expense that may, or may not, produce something of value. The IRS is using a theory of value where software (1) is a capital asset (okay, sure), (2) has a six-year deprecation schedule (uhhh why not 5 like everything else?), and (3) is valued at the exact cost of all inputs to it, including salaries (u…

> This is unlike how capital assets are valued for any other industry! Is your dismay that it's unfair compared to other industries or that the policy doesn't reflect reality that software is a capital asset that has a lifetime longer than 6 years for many companies?

Software just isn't a "capital asset" in the traditional sense. It might have a multi decade depreciation in real life, or it might be worthless shortly after writing. I mean, we live in a tax regime where a jet is 100% depreciable in the year its purchased. Srsly.

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

#168

Post by [deleted] »

codingdave wrote: post #155

Signing a letter is fine, but will not have the same impact as phone calls made to your representatives. https://5calls.org/why-calling-works/ You don't need to use that site - the point is that if you want to have the loudest voice, make some calls.

[deleted]

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

#169

Post by NickHirras »

logifail wrote: post #132
GavinMcG wrote: post #124

Earlier quoted context omitted.

It found it helpful that it was presented that simply. The point isn’t what else is or isn’t deductible, it’s that engineering salaries went from being deductible to being amortized.

Businesses don't get to say they're claiming "$900k in costs" ... it depends on what kind of costs ... EDIT: and in this instance, it depends on what kind of software engineering.

This is what's happened at my workplace. We account for time spent working on developing new products differently that development time maintaining legacy applications. Because they are reported for tax purposes differently.

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

#170

Post by SV_BubbleTime »

KerrAvon wrote: post #41
Jabrov wrote: post #11

Earlier quoted context omitted.

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…

Hmm, I thought Americans were the backbone of the USA.
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