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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)

#871

Post by rgbrgb »

thaumasiotes wrote: post #166
rgbrgb wrote: post #102

Earlier quoted context omitted.

I don't follow. What is the motivation of doing something intentionally bad to make it easy to reverse?

The other responses have the right idea, but in more detail: All congressional bills receive an estimate of their budget impact over the next ten years. Whatever happens after ten years doesn't count. The politics are that a bill should have no budget impact within that ten-year window. As an uncharitable stylized example, you'd propose to start paying random subsidies to constituents immediately in the amount of $20…

ok, got it. So... this helped it pass because it allowed the headline to be "budget neutral" even though all signs point to this piece getting removed quickly and ultimately expanding the deficit. Sounds dishonest but logical if the objective is to reduce taxes without genuine consideration of the deficit. Thanks (to you and siblings) for the explanation.

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

#872

Post by saltcured »

thayne wrote: post #866
rayiner wrote: post #829

Earlier quoted context omitted.

> 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. The question is: are you getting the value of that work in the same tax year, or is it creating an asset that creates value over time? If you hire a gu…

But in that case, once the fermentation system is built, the brewery no longer needs that employee. A better analogy is a brewery hires someone who builds a fermentation system, then continues to operate, maintain, repair, and improve the system over time. Some of the employee's time is spent on work that could probably considered R&D, some of it is on work that is clearly operation, and some isn't clearly one or the…

How does a chef get categorized? They develop recipes which have future value but also do a lot of ephemeral work product.

I think the issue is this fantasy that a software develop only produces long term IP. Or how is it different from an executive who is developing strategy and market positions that have future value?

Maybe it would make sense if we could distinguish such work products as a fraction of their total output, tracked as actual inventory that accountants have to assign value and track capital gains on?

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

#873

Post by saltcured »

daxfohl wrote: post #860
MichaelZuo wrote: post #835

Earlier quoted context omitted.

Yeah this is the most plausible interpretation. Software engineers being taxed similar to brewery design engineers seems reasonable, not the person literally brewing each batch of beer.

What about oncall? What about fixing bugs, or KLO, or security patches, or devops, or tweaking feature flags, or dealing with customers? If you're 100% allocated to a greenfield project that's behind closed doors until 2027, sure. But it doesn't seem like most software engineers are in that bucket. If anything, the industry has been consistently moving further away from that, with more agile methods, tighter feedback…

Right, many software jobs are more like being a janitor or repairman. Or even more of a personal assistant or retail worker who is providing ephemeral service to another participant in the whole organization.

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

#874

Post by logifail »

odo1242 wrote: post #267
logifail wrote: post #212

Earlier quoted context omitted.

> it classifies all software development as R&D by definition We may need to argue about the word "development", but in any case, do you have a reference for that? https://www.thomsonreuters.com/en-us/posts/tax-and-accountin... "In the United States, to help spawn innovation as part of the Economic Recovery and Tax Act of 1981, the Research & Experimentation Tax Credit was introduced. Although it was initially suppos…

People think R&D expenditure shouldn't be amoritized because it hurts startups. For example, if you're a first-year startup and you make a software product with $1 million in revenue but pay $900,000 in software dev salaries, and the tax rate is 25%, without amoritization you pay (1,000,000-900,000)*0.25 = $25,000 in tax and make a profit, but with 5-year amoritization you pay (1,000,000-900,000/5)*0.25 = $205,000 in…

> People think R&D expenditure shouldn't be amoritized because it hurts startups

(Not trying to be deliberately obtuse but) which people "think this"? Startups and their investors, obviously, but who else?

If world+dog has to amortize their R&D expenditure, why should startups be exempt, essentially "because software dev salaries"?

> But since established companies aren't affected as much, they are advantaged by the amoritization rule.

Q: Why should startups get a specific tax carve-out for "R&D"?

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

#875

Post by twodave »

vasco wrote: post #320
dang wrote: post #14

Earlier quoted context omitted.

The number of threads and the comments in those threads. e.g. from a few days ago: https://news.ycombinator.com/item?id=44208063 https://news.ycombinator.com/item?id=44208875 https://news.ycombinator.com/item?id=44207240 https://news.ycombinator.com/item?id=44205579 https://news.ycombinator.com/item?id=44205479 https://news.ycombinator.com/item?id=44204864 https://news.ycombinator.com/item?id=44204808 https://news.yc…

Thanks - interesting to focus on tax cuts for the already rich but I guess it does make sense if the people here want it.

You're not actually wrong. Reversing it would have immediate and far-reaching benefits for large companies. I suspect many of those would respond by going on hiring sprees.

And also, reversing it would encourage more people to start software businesses. So while not a tax cut for small businesses that don't exist yet, it does help those future potential leaders make the leap.

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

#876

Post by atxtechbro »

arrowsmith wrote: post #736
atxtechbro wrote: post #76

Signed. As a US-based developer, I fully support restoring the deductibility of software development expenses. This policy change quietly gutted countless startups and engineering teams—it’s long past time we fix it. Appreciate YC and folks like @itsluther pushing this forward. This isn’t just a tax issue—it’s about keeping innovation and talent thriving in the US. Let’s get it done.

[flagged]

Why does it matter? In a little while this will stop being a question people will ask. If anything it shows I put value into a high quality comment, that shows effort, and I also hand signed the letter form.

I guess the point about how hard it is to manually type that character is a great point though, I appreciate that!

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

#877

Post by nrmitchi »

thayne wrote: post #866
rayiner wrote: post #829

Earlier quoted context omitted.

> 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. The question is: are you getting the value of that work in the same tax year, or is it creating an asset that creates value over time? If you hire a gu…

But in that case, once the fermentation system is built, the brewery no longer needs that employee. A better analogy is a brewery hires someone who builds a fermentation system, then continues to operate, maintain, repair, and improve the system over time. Some of the employee's time is spent on work that could probably considered R&D, some of it is on work that is clearly operation, and some isn't clearly one or the…

How about actors? They produce a thing (content) that is sold for a prolonged period of time. Copyright is what, 20 years?

How would Disney feel if the salary paid to the cast of the Avengers was no longer an expense in that year, but amortized over the entire copyright period of the film.

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

#878

Post by twodave »

andrewlgood wrote: post #602
droptablemain wrote: post #443

My understanding is that the current "Big Beautiful Bill" reverses this

Do not think that is correct. The original accelerated depreciation is simply not being renewed.

IANAL, but the language of the bill seems to suggest GP was indeed correct:

https://www.congress.gov/bill/118th-congress/house-bill/7024...

It seems they're going back to the system where one could choose to amortize those capital expenses, but not be required to.

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

#879

Post by lurkshark »

adamc wrote: post #823

I don't favor any tax breaks for big tech until they actually start paying meaningful taxes. There have been far too many giveaways. The country is running a massive deficit, and the current "solution" is to balloon the deficit and throw the poor under a bus.

I agree with you to some extent, but what I’ll add is that “big tech” is well positioned to weather these changes. The part that concerns me is that this will probably push small companies to take on VC money they otherwise wouldn’t need to get through the early years. Then you have a reinforcement of VC profits concentrating wealth.

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

#880

Post by [deleted] »

thayne wrote: post #866
rayiner wrote: post #829

Earlier quoted context omitted.

> 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. The question is: are you getting the value of that work in the same tax year, or is it creating an asset that creates value over time? If you hire a gu…

But in that case, once the fermentation system is built, the brewery no longer needs that employee. A better analogy is a brewery hires someone who builds a fermentation system, then continues to operate, maintain, repair, and improve the system over time. Some of the employee's time is spent on work that could probably considered R&D, some of it is on work that is clearly operation, and some isn't clearly one or the…

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