661–670 of 957 posts
Thanks for working on this guys. The current tax code is fairly crazy: you could spend a few million in salaries, sell 200k of software in a year and possibly owe taxes on that. Even if the company would otherwise be shutting down. The traditional capital asset treatment applied to software leaves a lot to be desired. Some software is a capital asset, but much just isn’t. Or at least should be considered to depreciat…
Earlier quoted context omitted.
You know not what you speak of. I am small developer without funding. For every developer I hire I pay tax on 90% of their wages in year 1. So, if I hire a 200k a year developer, I have an increased tax liability of 180k. That works out to paying about $75k ~ $85k. So my 200k developer becomes an 285k developer. Now, eventually I could regain that cost, or I could do like I know of a few companies and commit tax frau…
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Exactly what he is saying. He doesn't deserve a special treatment and should be taxed like everyone else.
Anyone know what the situation in Europe is?
Most European countries don't have deductions for SW devs. Romania had it for a long time and removed it due to gov budget deficits. Some other CEE countries might still have them, but in general most socialist western European countries don't have them, which is why they don't have a tech industry.
Even more so for startups in Estonia and Latvia (probably Lithuania too) you can fully deduct R&D in general - not sure for how long.
That is you have you have 1M in sales 200k in net profit(after paying for everything including software development).
If that 200k in net profit is plowed back into speculative R&D it does not incur income taxes until money is paid out.
Even more so you can invest some 200k pre-tax in assets such as buildings. You only get taxed when you actually take out the money. In a way this is a pretty big loophole provided you are actually cash flow positive.
Basically in Baltics you can follow the early Amazon strategy of not making net profit, but investing in growth.
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That's not really the issue (and I say this as a socialist). The issue is that it's a weak and very leaky definition that attempts to redefine anyone that touches "software development" away from being taxed like employees into being taxed like machines that produce assets at the same value as their cost of operating. This punishes small businesses and new businesses more than any large org because it massively incre…
From a more left-wing perspective, it certainly doesn’t feel like a coincidence that Section 174 kneecaps anyone who’d try to compete with the FANG trusts. I’m sure an oligarch paid good money to insert this rubbish into the tax code. Well, relatively good money. American politicians are shockingly cheap to pay off. Probably only took $10k each, to convince them to destroy billions in economic value. It’s a rare thin…
So a startup that's paying $200k in its first year but only making $40k in that year, they still get to deduct the labour costs over the next 4 years.
But of course this is only true as long as revenue is less than labour costs. Eventually you do want to make money, and it feels like you can only do that when you stop hiring more people.
But regardless of its effects on different types of companies, I don't understand how anyone could pretend that this way of handling labour costs makes any kind of sense.
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…
I keep seeing an objection in this thread along the lines of "what make software so special that it deserves a tax deduction". Correct me if I'm wrong, but if a company hires someone to say, mine coal or brew beer, the expense of those employees is an expense any company can claim a full tax deduction on. If you're a line chef or wait tables, your salary is tax deductible to the restaurant. So it's not that we are as…
In the future? That's how it works!
> just as Sec 174 treats the labor of software developers as assets.
[I was wrong about the following. I misread the text - and the submission title.] That's not what 174 does.
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That is making assumptions that aren’t based in reality. Serious software R&D stopped relying on patents and copyrights years ago because they are effectively non-enforceable in many cases. A significant percentage of algorithm and foundational computer science R&D in software is now protected exclusively via trade secrets. There are no other practical options. This wasn’t always the case but all other forms of prote…
It's not really "weaponizing the tax code because of an ideological aversion"; it's more: * It makes sense to tax capital assets as such. * If companies do R&D and think the results are valuable enough to be kept secret, then obviously they're an asset. * Depreciation is because real-world assets actually require ongoing maintenance or become worthless over time, but information does not. * Finite-term IP grants (e.g…
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…
I keep seeing an objection in this thread along the lines of "what make software so special that it deserves a tax deduction". Correct me if I'm wrong, but if a company hires someone to say, mine coal or brew beer, the expense of those employees is an expense any company can claim a full tax deduction on. If you're a line chef or wait tables, your salary is tax deductible to the restaurant. So it's not that we are as…
This is bad for the economy and ultimately reduce our tax base.
About the only thing that doesn't happen is for non-reproducible privileges such as land, intellectual properties, the electromagnetic spectrum, etc.
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…
What happens if you outsource all that to an "offshore" company? Is it considered an expense?
Earlier quoted context omitted.
That is making assumptions that aren’t based in reality. Serious software R&D stopped relying on patents and copyrights years ago because they are effectively non-enforceable in many cases. A significant percentage of algorithm and foundational computer science R&D in software is now protected exclusively via trade secrets. There are no other practical options. This wasn’t always the case but all other forms of prote…
It's not really "weaponizing the tax code because of an ideological aversion"; it's more: * It makes sense to tax capital assets as such. * If companies do R&D and think the results are valuable enough to be kept secret, then obviously they're an asset. * Depreciation is because real-world assets actually require ongoing maintenance or become worthless over time, but information does not. * Finite-term IP grants (e.g…