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

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

#171

Post by cjbgkagh » Mon, Jun 09, 2025, 5:56 PM UTC

freedomben wrote: post #127

cjbgkagh wrote: post #113

Earlier quoted context omitted.

The worse it was the better it worked as a budget fudge and it could be included in projections and allow a budget neutral bill to be passed. And by being so bad it would be easier to reverse as fewer people would defend it. There was an attempt to eat their cake and have it too.

Why is it still in place?

Because it wasn't bad enough. Look at the fervor it's causing now - now imagine if it was worse.

In politics it may seem like a good idea to create these time bombs because they can't imagine them going off but sometimes they do and here we are. The pied-piper strategy with the basket of deplorables was supposed to make it easier for Hillary to win 2016 but she didn't so we got the bomb going off instead.

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

#172

Post by [deleted] » Mon, Jun 09, 2025, 5:58 PM UTC

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.

[deleted]

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

#173

Post by downrightmike » Mon, Jun 09, 2025, 5:58 PM UTC

We need zero interest rates back to actually get this to work, because that means essentially zero risk to any project. even s174 can't do that.

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

#174

Post by Mistletoe » Mon, Jun 09, 2025, 5:58 PM UTC

wulfgarbet wrote: post #25

Mistletoe wrote: post #5

What is a software dev expense and why should it be tax deductible?

When a company that earns $150k/yr and hires a software engineer who costs $100k/yr, that company should be able to deduct that salary in full. The way it works today they must amortize it, taking only 20% per year. So they’d owe taxes on $130k of $150k, instead of the more rational $50k of $150k. This effort is to restore rationality.

Why was the change made to amortize the tax?

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

#175

Post by Ajedi32 » Mon, Jun 09, 2025, 5:58 PM UTC

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…

I agree this sounds like bad policy, but what's the logic for doing this with actual capital goods then? Doesn't that have exactly the same problem of limiting corporate investment?

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

#176

Post by SV_BubbleTime » Mon, Jun 09, 2025, 5:58 PM UTC

dang wrote: post #31

lostdog wrote: post #19

Interesting that YC is jumping on this tax code thing, but the shitty tax situation for employees trying to hold onto the equity they've earned is just ignored. The number one problem for startup employees is that the AMT tax makes it impossible to exercise options in a company that is doing well. YC is showing us that they will fight for changes to the tax code when it benefits their bottom line directly, but are si…

It's possible to care about more than one thing. Who doesn't?

H1B posts when?

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

#177

Post by varsketiz » Mon, Jun 09, 2025, 5:58 PM UTC

dang wrote: post #52

varsketiz wrote: post #38

Somehow I'm not a fan of HN using this community for lobbyism purposes.

pg used to do it semi-regularly, especially on internet freedom isssues (edit: and software patents, IIRC), so arguably this is getting back to HN's roots. I remember he did an anti-SOPA thing on HN which involved some kind of banner at the top of the frontpage. It's probably saved at archive.org somewhere.

I guess I understand internet freedom causes better. Also, they are universal worldwide, this is USA specific

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

#178

Post by righthand » Mon, Jun 09, 2025, 5:58 PM UTC

Could LLM companies be lobbying to remove this tax incentive in hopes to help kill the job?

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

#179

Post by teeray » Mon, Jun 09, 2025, 5:59 PM UTC

abeppu wrote: post #158

teeray wrote: post #133

Earlier quoted context omitted.

> under what definition of software engineer? Probably a broad enough definition to net the US Government the greatest tax revenue possible for the effort to enact this.

IDK if that's right. Oddly, the current administration has gutted the IRS and seems pretty ambivalent about collecting taxes that are on the books. I wonder if there will be an inconsistent definition of who is a software engineer, based on how friendly the company is with the administration, whether the company still has someone with a DEI title, etc.

> the current administration… seems pretty ambivalent about collecting taxes that are on the books. I wonder if there will be an inconsistent definition of who is a software engineer, based on how friendly the company is with the administration, whether the company still has someone with a DEI title

So basically the same situation that we have with bullshit speed limits everywhere.

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

#180

Post by TulliusCicero » Mon, Jun 09, 2025, 5:59 PM UTC

gnopgnip wrote: post #162

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.

I don't think that's quite right? The value of the asset itself is depreciated over years, sure, but the payroll itself for the employees is just an immediate expense.