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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)

#401

Post by JumpCrisscross »

jamessinghal wrote: post #373
OneDeuxTriSeiGo wrote: post #318

Earlier quoted context omitted.

But that's the rub right? What is the definition of maintenance activities? And for what software? If you are writing a new script to automate something or updating an existing script, is that not software development? If that's considered maintenance activities then would maintaining a software codebase not be considered maintenance activities then?

The IRS Guidance says this in 5.05(2), which is most relevant to software startups: (2) Computer software developed for sale or licensing to others. In the case of computer software that is developed for sale or licensing to others (or upgrades and enhancements to such software), activities that occur after such software (or upgrades and enhancements to such software) is ready for sale or licensing to others, such as…

Has the IRS actually dinged anyone for fucking with how they categorise software expenses?

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

#402

Post by cryptonector »

elictronic wrote: post #181
freedomben wrote: post #127

Earlier quoted context omitted.

Why is it still in place?

The Republican Party is actively antagonistic to any legislation from the Democratic Party basically. You need a 60% vote or you need to take away someone else’s pie. Medicaid/medicare/social security are current contenders based on Republican planning. The bigger issue is Republican voting districts gain less from putting it back in place. Most software devs are on the coasts and Denver.

Uhm, but the Democrats held the House and Senate for two years during the Biden administration, which came after the Trump tax cuts.

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

#403

Post by winter_blue »

TheTaytay wrote: post #151

Thank you for helping to tackle this. The silence on this issue for the past few years from smaller software companies and their affiliates was surprising to me. The recent "time bomb" article was one of the few media pieces that actually took the time to describe it as anything other than a "tax cut for huge tech companies", which was refreshing. My current favorite theory as to why there hasn't been more of an outc…

> many companies ignored the rule change

How does that even work? You’re saying many companies committed tax fraud by ignoring the law change and continued to deduct software developer salaries as they had in the past?

I find that hard to believe.

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

#404

Post by throwaway7783 »

fwip wrote: post #371
throwaway7783 wrote: post #309

Earlier quoted context omitted.

Whether it is $1 or $0.10, it is non existent for young software companies. If I'm penniless (after real expenses), where will I get those 10 cents to pay the taxes? And I'm not making this up. We are about to get cash flow neutral in our company, and this law will literally kill us and make 20 US citizens unemployed.

Well, same as any other expense. You find a way to pay for it, or you go out of business. If the number is 10%; you need either 10% more revenue or 10% less costs.

Except its a fabricated expense by law. Of course we can say "it is what it is, deal with it" for pretty much anything.

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

#405

Post by bmurphy1976 »

bradleyishungry wrote: post #396
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…

this is not entirely true and i’ve seen the exact same comment regurgitated with the same exact numbers for the past two years. I am not in really in favor of section 174 but i’m tired of seeing misinfo. I have discussed this with a CPA multiple times and its simplified and blown out of proportion in a way that you can’t actually have a conversation about it

Your comment would be much more helpful if you explained how op is wrong or linked to another resource or prior comment that did so.

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

#406

Post by chasd00 »

niam wrote: post #71
varsketiz wrote: post #38

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

May I ask why? It's expressly the intention of democracies to hear from constituents (and conversely: groups of constituents). That we happen to call that feedback loop "lobbying", and that the term carries some societal baggage from corporations using/abusing it is unfortunate, but shouldn't be an indictment of what is otherwise a democratic function. Some group FOO with a shared ill should be able to convene about…

The main issue to me is now every political issue that isn't raised here makes HN complicit in its success/failure. Once HN starts down this path it can only continue and accelerate or else face accusations of support/opposition through silence.

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

#407

Post by pc86 »

jldugger wrote: post #392
ASalazarMX wrote: post #118

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. We all do this at the conclusion of every successful job interview. And performance review. And budget review. IMO it's a reasonable floor on the value engineers produce: if you produced an asset worth less than your salary you should be concerned for your career.

On what time scale? In a year, sure. But there are certainly days (weeks?) where the actual value produced by any one engineer is zero, or negative.

This whole discussion is sort of orthogonal to the real point, though. The state (or the IRS, or Congress, or whatever) has decided that for some reason, if Jim gets paid $100k his boss can deduct $100k in expenses, but if Jane gets paid $100k her boss can only deduct $20k, because she's typing different things into a different box the computer.

This is a categorically stupid thing to assert. It's a stupid thing to say and it's a stupid thing to believe. Payroll is an immediate cost, paying for the development of software is not remotely the same thing as purchasing a capital asset, and this is exactly what we get when we keep electing nonagenarian plutocrats to office year after year, decade after decade, who think the internet is a series of tubes.

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

#408

Post by hermannj314 »

jweir wrote: post #354

The Small Software Business Alliance has been actively working on this issue since day one. https://ssballiance.org/about/engage/ And Michelle Hansen was an early organizer https://x.com/mjwhansen If you work at all in energy, the Clean Energy Business Network is also proactive in fighting for change. A couple of years ago they put me touch with Ron Wyden's staff. The Democrats are almost universally opposed to what…

[flagged]

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

#409

Post by ethbr1 »

jandrewrogers wrote: post #270
ethbr1 wrote: post #226

Earlier quoted context omitted.

If we had specifically defunded highway patrol that was net-revenue-positive, yes. Republican defunding of the IRS is literally insane: reform by cutting enforcement. - It rewards people who cheat on their taxes. - It costs the government more money that it saves, because IRS investment is net revenue positive. But then, the modern Republican party seems more concerned with being the party of 'law(s I agree with) and…

People greatly overestimate the amount of material cheating that happens, especially among large companies and the wealthy. I used to work for a Federal audit organization and almost all of the recoveries had a root cause in sloppy compliance and record-keeping practices rather than intentional malfeasance. It is broadly recognized as optimal that the recovered money should be several-fold the direct costs spent to r…

> the amount of enforcement activity has been pretty finely tuned for decades to optimize ROI

And then cut by 20% by the current adminstration [0].

I'd phrase the question of auditing lower income filers vs higher income filers differently -- do you think people with higher incomes should feel safer about cheating on their taxes?

Because average recoveries do scale with income [1]; unsurprisingly, it seems wealthy people commit tax fraud too [2].

While catching the low-hanging fruit (and therefore better ROI) is one goal, it needs to be balanced with ensuring there are similar levels of compliance (or penalties where it's lacking) in higher income payers.

[0] https://taxpolicycenter.org/taxvox/cuts-spending-and-staff-d...

[1] https://www.nytimes.com/2025/06/05/upshot/tax-audits-wealthy...

[2] https://www.irs.gov/newsroom/irs-launches-new-effort-aimed-a... https://www.irs.gov/newsroom/irs-tops-1-billion-in-past-due-... https://www.foxbusiness.com/politics/yellen-touts-irs-enforc...

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

#410

Post by chasd00 »

gg-plz wrote: post #140

The military is being unleashed against civilians and this is the political issue you’re concerned about on today of all days? Dang, you’re one of the bad ones.

wow, i'm going to copy/paste my response to someone upthread about how it's a bad idea for HN to get involved in political things like this.

"The main issue to me is now every political issue that isn't raised here makes HN complicit in its success/failure. Once HN starts down this path it can only continue and accelerate or else face accusations of support/opposition through silence."

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