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

Post by echelon » Mon, Jun 09, 2025, 6:05 PM UTC

zacharycohn wrote: post #141

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…

Just to drive the point home very explicitly: That means, in the given example above, you are able to deduct $180k that first year instead of $900k. That gives you a profit, from a tax perspective, of $820k. But you only have $100k of actual dollars. Good luck paying your taxes!

Post by edoceo » Mon, Jun 09, 2025, 6:05 PM UTC

runako wrote: post #46

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 developme…

Post by PaulHoule » Mon, Jun 09, 2025, 6:05 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…

Post by rvba » Mon, Jun 09, 2025, 6:06 PM UTC

freedomben wrote: post #143

bdcravens wrote: post #84

Are there any sources for the argument why this should apply to software and not to, say, farm equipment? The cash flow and taxation story seems to be the same.

When you buy farm equipment, you're getting something that (barring manufacturer defects, natural disasters, etc) is (nearly always at least) a long-term asset going to be providing a very predictable level of value over the next many years. Same with computers and things like that. With software development, the predictability is almost entirely non-existent for new and/or smaller software companies. I've personally…

Post by sailfast » Mon, Jun 09, 2025, 6:08 PM UTC

teeray wrote: post #133

OneDeuxTriSeiGo wrote: post #119

Earlier quoted context omitted.

So it applies to software engineers but under what definition of software engineer? This [1] is the only definition the code actually give. > (3) Software development > For purposes of this section, any amount paid or incurred in connection with the development of any software shall be treated as a research or experimental expenditure. 1. https://www.law.cornell.edu/uscode/text/26/174 ----- Is a test or QA engineer c…

> 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.