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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)

#671

Post by blindriver »

arunabha wrote: post #659
blindriver wrote: post #656

Earlier quoted context omitted.

In the first year, you only get to deduct 20%. But in your second year, you get to deduct 40% (20% from the first year and 20% from the second year). In the 3rd and 4th year it's 60% and 80%. And so on until you get to steady state of 100%. So, no, it is not "really bad" for you. You as the owner might not make as much money for the first year, but you will be at steady state in a few years, and you get to deduct the…

I think an implicit assumption here is that the company is able to survive the five years. This rule affects cash flow in the initial years pretty hard and a lot of small companies cannot survive that.

In the initial years most startups have massive losses that they carry forward and don’t need to pay taxes anyway. During that bridge period the affect of section 174 is zero since they aren’t paying taxes anyway.

This really only affects software companies that are profitable in their first year, which is a very small minority.

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

#672

Post by threeseed »

echelon wrote: post #496
bravesoul2 wrote: post #492

Earlier quoted context omitted.

ELI5: why is this blowing up on HN this particular week in 2025. Is there a trigger? As it has been known about for a while.

It's actively being discussed in Congress and is a part of OBBBA. " H.R.1990 - American Innovation and R&D Competitiveness Act of 2025 " https://www.congress.gov/bill/119th-congress/house-bill/1990... > A bipartisan bill reintroduced in Congress last month could offer long-awaited relief to small tech companies hit hardest by an obscure federal tax change — one that many founders say is threatening their survival. >…

So is the idea here that the tech community should support the Big Beautiful Bill ?

Because that would be just typical.

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

#673

Post by threeseed »

garrickvanburen wrote: post #262

What 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?

I assume so it can be included in the Big Beautiful Bill.

And if that is the case then shame on everyone who are happy to make themselves wealthier at the expense of the poor.

People are literally going to die because of the cuts to Medicaid/SNAP in this bill.

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

#674

Post by gsf_emergency »

demosthanos wrote: post #69
wodenokoto wrote: post #4

Other than it’s nice not to have your profession taxed, what is the argument that software development shouldn’t be taxed as opposed to all sorts of other white collar work?

I posted a short explanation here [0] on the thread the other day, but the even shorter explanation is that "software development shouldn't be taxed" is not an accurate description of what repealing the change to Section 174 would do. This discussion has nothing to do with what work gets taxed (all profit is taxed no matter the industry) and everything to do with what counts as "profit". The Section 174 changes alter…

Software is a special kind of white-collar work which promises to simultaneously provide a sense of entitlement as well as an equal measure of frustration.

Lately (since 1971?), the balance has tilted over to the other side, so I welcomed any move to restore it :)

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

#675

Post by dgb23 »

robocat wrote: post #453
sh34r wrote: post #357

Earlier quoted context omitted.

A sufficiently idiotic tax scheme such as Section 174 can destroy far more income tax revenue than it collects, by destroying jobs and small businesses, and knocking high earners down a tax bracket or three. Section 174 isn’t doing much to tax FANG companies. Apple has all their profits in their Double Irish Dutch Sandwich racket. Amazon cooks the books to appear unprofitable on paper, in a manner that would make Hol…

> I think Zuck, the PayPal Mafia, and the blood-boy cabal bribed some Congresscritters to kill off what remained of their competition. What's with the craze for finding conspirational incentives? There's a repeatable pattern where commenters hallucinate an unreasonable incentive for everything. Motivations are difficult to discern (see courtrooms), and it is a modern vice to try and analyse incentives, but too often…

It’s much simpler than that. People have figured out that if you follow the money (ask who profits financially or in terms of market power), then even confusing political actions make sense.

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

#676

Post by threeseed »

sergiotapia wrote: post #283
codingdave wrote: post #155

Signing 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)

[flagged]

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

#677

Post by gbnwl »

bawana wrote: post #276

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…

It's already been in effect for the past few years. Does it feel like it's inhibited rapid turnover to you?

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

#678

Post by threeseed »

codingdave wrote: post #351
sergiotapia wrote: post #283

Earlier quoted context omitted.

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)

Say whatever you feel. They will listen to you and sort it out into support or opposition to current legislative efforts. You don't have to have a perfect script - just tell them what you think. But I would caution you to talk about the issues you care about, not telling them you support a specific bill. Because they need to know what issues you care about so that when legislators propose changes to the bills (which…

[flagged]

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

#679

Post by littlestymaar »

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 rule is actually desired by most (non-startups) businesses, software being an investment over a long run it makes sense to amortize the cost over several years.

It is indeed detrimental to startups though, as they can end up paying taxes even when not profitable and when cash is the key issue (which isn't the case that much for most businesses).

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

#680

Post by procaryote »

kgwgk wrote: post #666
bunnie wrote: post #637

Earlier quoted context omitted.

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…

> One could argue in the future, for example, that those who operate machines to produce tooling dies, should not have their labor treated as regular expenses, but instead as capital assets because their labor output is captured in assets, 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 t…

source?
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