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

Post by [deleted] » Tue, Jun 10, 2025, 10:07 AM UTC

bunnie wrote: post #728

kgwgk wrote: post #666

Earlier quoted context omitted.

> 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…

Fair enough, that was not the best example. But I'd also observe that since business owners have to capitalize the wages of the machine operators producing injection molds, then there is an advantage to outsource the whole operation. Comparing a procurement manager and a CNC operator [the person running the milling machine making a mold] paid the same amount, the CNC operator has a bigger negative impact on the busin…

Post by marci » Tue, Jun 10, 2025, 10:28 AM UTC

FirmwareBurner wrote: post #720

zoobab wrote: post #715

Earlier quoted context omitted.

"which is why they don't have a tech industry" We do have a tech industry, just not large behemoths. Looks like politicians dream about creating behemoths, and they dream about unicorns too.

Europe doesn't have any behemoths that are younger than 40+ years but every behemoth that Europe has was once a start-up too in the distant past: Novo Nordisk, ASML, Airbus, Bosch, Siemens, VW, Nestle, etc. How do people forget this? Behemoths are important because only they have the massive R&D budgets to experiment on new and risky ventures, but also have the economies of scale to built massively expensive and comp…

Post by Schiendelman » Tue, Jun 10, 2025, 10:38 AM UTC

blindriver wrote: post #671

arunabha wrote: post #659

Earlier quoted context omitted.

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.

Post by projektfu » Tue, Jun 10, 2025, 10:56 AM UTC

rubenvanwyk wrote: post #663

Doesn't this incentivize outsourcing or fractional work to some degree, because that would still be counted as regular expenses?

Post by rbultje » Tue, Jun 10, 2025, 11:07 AM UTC

Plasmoid2000ad wrote: post #725

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…

This wasn't my first impression of this, but the more I heard this dicussed the more I'm forming an opinion that there might be some intentional parts of this that while maybe not being good, make sense from a certain narrow perspective. My assumption is, if tax folks in the US were looking Jealously at US companies with large Multinational presence declaring a lot of their profits abroad. They might have noticed tha…