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Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
281–290 of 957 posts
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#282Earlier quoted context omitted.
That's nuts, since a payroll should never be considered an asset. That's trying to put a material value on software, and doing it based on the salaries of developers is as crazy as valuing it in lines of code. The value of software could be based on something more realistic, like a percentage of actual revenue, but I suppose tech giants would be against that.
> That's trying to put a material value on software, and doing it based on the salaries of developers is as crazy as valuing it in lines of code. Software clearly has material value. For software that is built, not bought, the company building it clearly values it exactly enough to pay the salaries of the software developers building it. What other estimate of its material value is better than the one that the compan…
The price at which it sells the said software? Aka profits after expenses?
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#283Signing 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.
Ok, say I call. What do I say: "Hey I want to show my support for the Big Beautiful Bill because it reverses the tax deduction for software engineers."
And then what? (asking honestly lol for anyone who's done this before)
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#284Earlier quoted context omitted.
The argument I’ve heard is it specifically makes investing in speculative software (new product lines, new features, etc) more expensive. If you’re doing new drug discovery at a bio-lab, treating all your failures as depreciating “assets” seems bonkers. The same seems true of much software development where the work product ends up thrown away.
The answer to this seems obvious to me: let the company publish all code and documentation pertaining to failed experiments and release it into the public domain to be allowed to fully depreciate it immediately. If it is actually worthless, they should be happy to do so.
As long as the same is held true about car designs that never went to production, drug design that were not deemed profitable etc.
Why pick on just software?
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#285@dang (and others). If you want a groundswell of support have you consider have you considered reaching out to game devs and indie game devs? It seems like they'd all be negatively affected. They'd spread the word to players.
That's a great idea but I don't know how to do it except by posting a thread like this one on HN itself.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#286Doesnt this new law inhibit rapid turnover tho? Since it takes 5 years to get the full deduction of an employee’s salary, there is an incentive to keep the employee around. OTOH, the souless bean counters who want quarterly (if not shorter) time horizons, will simply decrease starting salaries and use other methods to be net zero. If they do shaft the software engineers, then the converse is true-no employee should s…
The short-term effect is that engineers become more expensive, so you can afford to hire less engineers. This creates more of a moat for large well-established companies at the expense of new startups.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#287Earlier quoted context omitted.
The argument I’ve heard is it specifically makes investing in speculative software (new product lines, new features, etc) more expensive. If you’re doing new drug discovery at a bio-lab, treating all your failures as depreciating “assets” seems bonkers. The same seems true of much software development where the work product ends up thrown away.
The answer to this seems obvious to me: let the company publish all code and documentation pertaining to failed experiments and release it into the public domain to be allowed to fully depreciate it immediately. If it is actually worthless, they should be happy to do so.
That doesn’t follow. Code can contain extremely sensitive and/or valuable IP independent of the value of the code as an asset. Reduction to practice frequently fails to produce usable software.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#288A 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…
Does it apply to solo companies that provide software consulting to others? I guess it doesn't for S-Corps, because of passthrough, but might for C-Corps?
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#289Earlier quoted context omitted.
Doesn't this kind of make sense if software is an asset? If your company purchases a seat of Oracle or Solidworks or Windows 11 or whatever. I don't think you can expense that all at one time, you have to amortize over the useful life of the software, just like if it was a physical printing press or a backhoe. Similar if you were making a software program for sale or for use internally, there is the upfront costs ass…
Thanks, this is the closest thing to making sense. But it still doesn't make sense. Like you said, this is a pretty weird characterization of software. I guess it would make sense to lawmakers who have no idea how it works. Combine that with the fact the lobbyists pushing this are 99% representing big tech and you start to get a picture of how this happens. Warning- brain dump not directly related to topic, read at y…
>The fact that maintenance is required belies the perspective that it's a capital asset.
I'm not following this. Factories, ships, stamping presses all require lots of maintenance and up keep.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#290What inspired working to reverse this now? I'm all for it, just curious as the law has existed for 8 years and been in effect for 3. Seemingly little interest from anyone in the tech world to put lobbying behind reversing it until this point. What changed?
Lobbying has been ongoing since the law was enacted. Congress came close to repealing it several times, with the House actually passing a bill to repeal it (Tax Relief for American Families and Workers Act of 2024).
Just because Hacker News doesn't care doesn't mean it hasn't been a big focus of small business lobbying since before it came into effect.
The actual reason it hasn't been repealed is politics: It makes the CBO budget deficit look much worse. It seems as though neither party wants the optics.