An obvious alternative would be tying it to any resulting copyrights and patents, without either there is no asset.
Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
501–510 of 957 posts
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#502Earlier quoted context omitted.
> We'll correct the ills of the 2017 administration in time How? We have - at times - had democrats in charge since 2017 and they did nothing to resolve this either. We appear to be waiting for flying pigs.
So because this is something we can do now and we want to do something now, we do this?
Supporting this is making a deal with the devil because he offered you two bottles of whiskey.
Its penny-wise and pound-foolish.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#503Earlier quoted context omitted.
Well, a larger issue seems to be that this whole idea is premised on taxing an unrealized gain. If I create a painting, I don't owe any taxes on it until I sell it. If the world decides that I'm Picasso and my sneezing on a canvas means it's worth $50 million, it still won't be true that, after I sneeze without covering my mouth and some spittle lands on one of my blank canvases, a government official shows up to my…
While I understand the drawbacks, the current situation - where the ultra-wealthy don’t pay taxes because all their wealth is in unrealized gain - is even worse
> the current situation - where the ultra-wealthy don’t pay taxes because all their wealth is in unrealized gain
This is neither the current situation nor even a theoretical possibility.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#504Salaries aren't a one-time expense, so is the amortization rolling? Like, year 1, you pay me $200k and deduct $40k. In year 2, you pay me another $200k, do you get to deduct $40k for year 1's salary and $40k for year 2's salary? I guess another way to ask is, does this mean that if you keep someone for 5 years and don't change my wages, is their yearly salary effectively fully deductible? If so, does that create ince…
There's no difference if you fire and hire a new worker every year or you keep them long term. You carry the amortization over until its completely written off.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#505Earlier quoted context omitted.
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…
> maintenance activities after the taxpayer places the computer software into service This is the part that I think makes this whole jig of treating software development like a purely capitalizable expense so nuts. I previously worked at a public company that wanted software developers to treat as much work as possible as CapEx - it makes you look more profitable than you actually are, which is bad for taxes but good…
What we do is enforce that everyone keeps one ticket in JIRA as in progress and use a timekeeping add on. The tickets role up to epics and initiatives. I review each top level initiative and epic with finance and they deem it capitalizable or not. Then we add a haircut. It’s really not that much work. We have an hour meeting monthly to work it out but I make sure to exclude my mainline engineers. They don’t need that
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#506Earlier quoted context omitted.
> We'll correct the ills of the 2017 administration in time How? We have - at times - had democrats in charge since 2017 and they did nothing to resolve this either. We appear to be waiting for flying pigs.
So because this is something we can do now and we want to do something now, we do this?
The opposite of what you're saying is "perfection is the enemy of progress", so let's move past them. I'm asking for more than "this is not the way". What is the way? How will we do this? This is critical, and we've failed to do anything since early 2022. Democrats are clearly not at all interested. My (Dem) congressman responded directly to my enquiry with "fixing section174 just wouldn't be good optics". I agree republicans can't be taken very seriously either if OB3 is the highest of highs. But we all want this fixed. So: how?
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#507Earlier quoted context omitted.
say I work for a company for 5 years as a software developer, at $200k/yr the entire time. is this how it works: year 1: company deducts $40k: 1/5 of the salary for year 1. year 2: company deducts $80k: 1/5 of the salary for year 2, and 1/5 of the salary of year 1. year 3: company deducts $120k: 1/5 of the salary for year 3, 1/5 of the salary for year 2, and 1/5 of the salary for year 1. year 4: company deducts $160k…
I agree Amazon should pay taxes. But this bill is not the way to make such companies pay taxes. It will kill competition and startups along the way. That is the crux of the issue. Edit: Looks like Amazon did indeed pay 15B+ federal taxes in 2024 (excluding sales tax etc)
Here are some charts and tables showing Amazon income taxes:
https://www.macrotrends.net/stocks/charts/AMZN/amazon/total-...
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#508Earlier quoted context omitted.
Maybe this is a dumb question, but if you only deduct part of their salary in the first year, what happens if you have a software developer for several years? And then what happens after five years if they are still around?
After five years you are back to the status quo. It is a short term problem, long term there is no difference between the two. It primarily hurts young companies that don't take VC money, and shortens the runway of those who do.
It also affects hiring growth because every net new dev starts a new 5-year runway.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#509Earlier quoted context omitted.
Each version of the software is a finished product just as any particular tractor is a finished product. The difference is that I know plenty of physical assets that companies buy which see no changes other than maintenance over their entire lifetime. I don't know of a single piece of software produced which receives only bug fixes. Yeah devs spend their time fixing bugs, but a large percentage of those bugs are the…
>I don't know of a single piece of software produced which receives only bug fixes. TeX https://web.archive.org/web/20190428184722/https://texfaq.or...
Interesting. However for the purpose of this discussion it is both:
A) Irrelevant since it's not being run by a for-profit corporation, the kind that would care about these tax bills.
B) It's a bit of a cheat. TeX itself may be approaching an asymptote, but scientists writing papers in TeX do not use it directly or on its own. White it has created a reference upon which to build it has also externalized all that research and development into the thousands of accompanying packages which do keep receiving new features and need updating just to stand still.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#510Earlier quoted context omitted.
>AFAIK, the increased spending at the IRS did not lead to concomitant offsetting recoveries. This is a predictable outcome, the amount of enforcement activity has been pretty finely tuned for decades to optimize ROI. Most of the recoveries come from changing focuses on compliance to areas that haven’t seen much enforcement activity in many years. Fighting entropy basically. AFAIK, all the data shows exactly the oppos…
These are studies designed to show positive results, and are susceptible to the criticism the parent identified. IRS enforcement has diminishing returns because the IRS starts with the small minority of people who are very obviously cheating on their taxes. Those people get audited and the IRS very easily recovers money from them. If you want to audit more people than that, you have to audit people who are less likel…
If you have been found to be cheating on your taxes, you should pay a fine that covers the cost of the audit.