291–300 of 957 posts
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…
Doesnt 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…
If you work at $CORP for 1 year (or 1 minute), $CORP gets to deduct the 1/5th of what they paid you for all 5 years, whether you still work there or not.
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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…
I seem to remember people being broadly in favor of this change at the time it was first proposed because it would elevade software development and create more long-term stability, but in a world where the primary focus is on quarterly funding rounded and acquisitions it obviously skews the numbers and thus the potential founded/early investor upside. There are two possible motivations for the impending change. One i…
You can see the older HN threads, people were shocked, and it comes up perennially, with calls to restore favorable tax treatment that incentivizes vs punishes business growth. Same pattern in social media responses to news articles.
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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?
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The IRS released guidance back in 2023: https://www.irs.gov/pub/irs-drop/n-23-63.pdf It starts on page 23. Plenty of analysis online by tax firms but I'll quote from this one: https://insightplus.bakermckenzie.com/bm/attachment_dw.actio... > Generally, activities treated as software development for section 174 purposes include, but are not limited to, the following. • planning the development of the computer software…
> • data conversion activities, except for activities to develop computer software that facilitate access to existing data or data conversion ex: linking excel spreadsheets or setting up excel to ingest data from a sharepoint or network drive would still fall under the definiton of software developer > • maintenance activities after the taxpayer places the computer software into service So a sysadmin or a DB admin wr…
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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…
The IRS released guidance back in 2023: https://www.irs.gov/pub/irs-drop/n-23-63.pdf It starts on page 23. Plenty of analysis online by tax firms but I'll quote from this one: https://insightplus.bakermckenzie.com/bm/attachment_dw.actio... > Generally, activities treated as software development for section 174 purposes include, but are not limited to, the following. • planning the development of the computer software…
I ask simply "If I have $1m of revenue and $1m of expenses that is entirely software dev salaries, what do you think my profit is for that year? How much should I be taxed on that?"
https://www.house.gov/representatives/find-your-representati...
Earlier 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. I'm not sure if depreciation is the same concept as we call amortización in my country: capital that counts as investment instead of expenses because you're expected to keep extracting value from it over the years, so you can't get a deduction for the whole expense when you f…
In practice software machines need constant tending and operation by engineers in order to keep them pumping out money.
In the context of live software systems, a lot of software engineering - even engineering that involves innovation and creative research and problem solving - is done in service of making the machine continue to operate; it is operational expense.
It’s like: Buying some filing cabinets is clearly a capital expenditure. But paying an office administrator to come up with and keep modifying the filing system you use in those filing cabinets to make sure it continues to serve your business is not capital investment, it’s business operational costs.