Earlier quoted context omitted.
[flagged]
Would you please stop posting flamebait comments? You have a history of doing this and we've asked you to stop more than once.
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Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
891–900 of 957 posts
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#892oh no! corporate profits!
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#893Earlier quoted context omitted.
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.
Though put that way, it seems hard to rationalize high salaries for software roles where this tax deduction would apply. Granted, supply-and-demand, but still.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#894Earlier quoted context omitted.
[flagged]
Would you please stop posting flamebait comments? You have a history of doing this and we've asked you to stop more than once.
More than happy to provided that HN goes back to not being political.
Because you're asking people to support something that will literally take families off of food stamps and remove their healthcare.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#895If the software written in a one year period of time for $100k is an asset then I, as a small business owner, can go to the local credit union and take out a loan on favorable terms with the that asset as collateral. No, of course not! They would laugh me out of the branch or the loan would be credit card interest rates. Software is demonstrably NOT AN ASSET like a major piece of equipment.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#896Earlier quoted context omitted.
They are just product managers and the development is being done by AI agents.
You jest, but you’ve also touched upon something interesting. Is this exactly what companies are trying to do? To the IRS: “We employ zero software engineers—only AI ranch hands to wrangle the AI in the right direction.”
not really jesting, just a message from the future
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#897Earlier 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…
If I hire a bunch of people to build me an apartment building, I deduct the full cost of their salaries in the year I pay them, even though once they build the apartment building, I get the value of that work over the following years. How is that any different from hiring a bunch of people to write some software, that I then get the value of over the following years?
> If I hire a bunch of people to build me an apartment building, I deduct the full cost of their salaries in the year I pay them
That’s not how it works in general (there are exceptions though): https://www.law.cornell.edu/cfr/text/26/1.263A-1
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#898Earlier quoted context omitted.
The short answer to some of those questions is yes. But clearly not for the final question: “does that create incentives to try to keep employees longer-term in order to make them more cost-efficient?”
I dont think the math works out in a way such that individual employees are not interchangable. It's based on engineer labor cost as a whole; there is no difference if the 3yr year employee was Jack or Jane. The net result here seems to be a tax-induced penalty to any (software) organization < 5 years old, as compared to a (software) organization with 5 years of employee history.
I don’t fully understand your comment but it seems that we agree that the answer to “does that create incentives to try to keep employees longer-term in order to make them more cost-efficient?” is “no”.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#899Earlier 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…
Repair and maintenance costs can be either operational expenses or capital expenses: https://www.nashadvisory.com.au/resource-centre/repairs-and-...
For example, if you pay for someone to maintain the brewery plant to keep it working in its current condition, that’s an operational expense that could immediately be deducted. But if the work is on upgrades and improvements, that’s ordinarily would be a capital expense that must be capitalized and depreciated. A bookkeeping strategy isn’t.
Your other examples are off the mark, because the question is whether the investment produces an income-producing asset. Software generally is such an asset. The question of what’s an operational expense versus what’s a capital expense isn’t always clear cut, and is the kind of thing where accountants and tax lawyers have to make judgment calls.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#900Earlier quoted context omitted.
The definition of capitalizable expenses tends to be the same between GAAP and tax. The depreciation schedules are frequently different.
Yes, it tends to. However: https://www.law.cornell.edu/uscode/text/26/174 any amount paid or incurred in connection with the development of any software shall be treated as a research or experimental expenditure [and be capitalized and amortized over five years even if it is disposed of, retired, or abandoned]
I stand corrected. I've not seen GAAP vs IRS differ so much in my experience. Thanks for referencing IRS section 174 which clears things up. It appears to be quite strict on the 5/15 year amortization of software development expenses, and I now agree with OP that the change to section 174 as part of the TCJA is some bullshit.