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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)

#701

Post by tsimionescu »

sitkack wrote: post #558
anigbrowl wrote: post #540

Earlier quoted context omitted.

Scripted automation is quite literally development of IP. It's an asset that belongs to the company and will be counted as such on its balance sheet.

Anytime someone has a good idea, it should be depreciated over 5 years? Why is software special? It is all just the composition of simple machines.

It's the other way around. Software used to be special, in that money the company spent to improve its internal processes by, say, buying a calculator had to be amortized, while money spent on developing software automation were not.

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

#703

Post by throwanem »

kortilla wrote: post #697
throwanem wrote: post #581

Earlier quoted context omitted.

This is politics. Perceptions matter. Changing the status quo is more difficult because it is the status quo, and that also matters. If you want to sell this change, the way to do it is to hammer on the fact that it was Trump's own TCJA that created the current situation, or that it was the machinations of a hostile Congress that so perverted the original intent of the TCJA, depending on audience. But even that is no…

I don’t know what bubble you’re living in but the “narrative” here is easily defensible. “The software engineering profession has been gutted by layoffs that explicitly make them 5x more expensive to startups than lawyers, electrical engineers, and doctors. This hurts both workers and employers while benefiting nobody other than foreign firms.” Nobody of relevance is mad people in tech get paid well. The only slice w…

Okay, now I know what kind of bubble you live in.

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

#704

Post by xlii »

thaumasiotes wrote: post #187
demosthanos wrote: post #130

Earlier quoted context omitted.

It's that it doesn't reflect the reality that the value of software is not remotely correlated with the salaries that were spent building it. It could be valued much higher or much lower, spanning a huge range. Using salaries as a proxy for value of the asset encourages only the safest shovelware bets, discouraging risk taking lest your asset be taxed at substantially higher than it's worth. Avoiding that risk-advers…

Well, a larger issue seems to be that this whole idea is premised on taxing an unrealized gain. If I create a painting, I don't owe any taxes on it until I sell it. If the world decides that I'm Picasso and my sneezing on a canvas means it's worth $50 million, it still won't be true that, after I sneeze without covering my mouth and some spittle lands on one of my blank canvases, a government official shows up to my…

IMO this is the best definition.

Especially since even in semantics we call highly successful companies „unicorns”. Because it’s rare. Usually software is worthless, whatever quality.

I failed my own software company twice. If such politic would be in effect I couldn’t even try once.

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

#705

Post by tossandthrow »

ncruces wrote: post #321
teeray wrote: post #159

Earlier quoted context omitted.

> The core question is to what extend software constitutes an asset Maybe we can finally deduct all that technical debt.

If a software project fails can we claim depreciation, like after a car crash?

Well, until now you automatically had depreciation.

In the future you will still get it automatically, just deferred.

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

#707

Post by happymellon »

kiba wrote: post #668
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…

Taxes on income or capital inherently reduce income and capital. Ditto for sale taxes, which reduces transaction volume. 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.

Taxes reduces taxes?

So are you saying that 0% rate taxes would capture the most tax?

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

#708

Post by xlii »

tossandthrow wrote: post #252
ashwinsundar wrote: post #219

Earlier quoted context omitted.

I think you are conflating "software engineers" with "software". A business that pays a software engineer doesn't automatically receive working software in return, especially not in the first year. It doesn't seem fair to assume that paying a dev $200k means that the business received an asset (some code) worth $200k in return, and thus can be taxed on it as if it were an asset producing $200k in profits a year.

I am not conflating, but the law is. Obviously it would be better to have an appraisal of the software - I reckon law makers see the cost of producing ad an ok proxy. Btw,this is how it is done in many construction projects also. Like bridges, budings, etc.

Um, so you have it so that if I hire (let’s say) bridge engineer for 100$ but he doesn’t get any materials and produces only paper model which I sell for 1$ does it mean I’m going to be taxed based on 101$ ?

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

#709

Post by runeks »

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?

> What changed?

This post made it to the front page: https://news.ycombinator.com/item?id=44180533

I, for one, had never heard of it before that.

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

#710

Post by tossandthrow »

xlii wrote: post #708
tossandthrow wrote: post #252

Earlier quoted context omitted.

I am not conflating, but the law is. Obviously it would be better to have an appraisal of the software - I reckon law makers see the cost of producing ad an ok proxy. Btw,this is how it is done in many construction projects also. Like bridges, budings, etc.

Um, so you have it so that if I hire (let’s say) bridge engineer for 100$ but he doesn’t get any materials and produces only paper model which I sell for 1$ does it mean I’m going to be taxed based on 101$ ?

andrewlgood is explaining the capitalization process in another thread under this post - I can recommend reading that.
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