corporate tax is already so low that we shouldn't have this kind of deduction at all: make corps pay income tax like citizens. there can still be deductions, but the idea of writing off all the costs of doing business is like people being able to write off rent, food, clothing, transport, etc.
Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
851–860 of 957 posts
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#852Earlier 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.
I don't understand the reasoning behind this, however. Why depreciate anything over multiple years vs just deducting it in the current year? Does it not all come out to the same amount to the IRS in the end?
this change was a timebomb used for CBO engineering purposes: to make a particular budget appear to have a specific delayed deficit behavior.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#853Earlier quoted context omitted.
These risks would appear to be the same as a shoe producer wanting to bring shoes to market - regardless they are still taxed on the value of their inventory.
Some of the risks are similar, but your "regardless" is bypassing the point. We can value a real shoe pretty well. But what if we could duplicate all the shoes we built for less than a penny per pair? What would be the value of our inventory?
There are pretty established accounting rules for this.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#854Earlier 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.
I don't understand the reasoning behind this, however. Why depreciate anything over multiple years vs just deducting it in the current year? Does it not all come out to the same amount to the IRS in the end?
The usual thinking is that a business wants an asset’s upfront expense spread over the years that asset earns income to reduce taxable profit in future years. In other words, the IRS receives more upfront but less total in the end.
The problem is that R&D and software development behave more like recurring annual expenses, not upfront investments in something like a building or industrial equipment. Small VC-funded startups may not exist long enough to reap the long-term benefits of depreciation.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#855corporate tax is already so low that we shouldn't have this kind of deduction at all: make corps pay income tax like citizens. there can still be deductions, but the idea of writing off all the costs of doing business is like people being able to write off rent, food, clothing, transport, etc.
My personal opinion - make corporate taxes go to 0% and shift tax burden to wealth and billionaires. Also, lower taxes on w2 income.
Counterintuitive, but I think that would bring offshore corporate bank accounts bank on-shore and encourage hiring.
Also, heavily penalize stock buybacks when corp tax rate goes to 0%.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#856Earlier 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.
I'm heartened to see this downvoted, since it's basically tax-trolling.
Yes, there are people who think tax==bad. Most people (and for a century or so) have understood that taxes are ultimately spent, and normally with a "multiplier". That is, on something which actually stimulates further economic activity.
Corporate profit, OTOH, normally just satisfies the rent-seeking economy, which is not productive in any natural definition. For instance, dividends and stock buybacks. Yes, some corporate profit feeds entrepreneurship, but that's simply not a large fraction of the corporate economy.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#857Isn't there another law that taxes research and development?
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#858Earlier quoted context omitted.
I don't understand the reasoning behind this, however. Why depreciate anything over multiple years vs just deducting it in the current year? Does it not all come out to the same amount to the IRS in the end?
The usual thinking is that a business wants an asset’s upfront expense spread over the years that asset earns income to reduce taxable profit in future years. In other words, the IRS receives more upfront but less total in the end. The problem is that R&D and software development behave more like recurring annual expenses, not upfront investments in something like a building or industrial equipment. Small VC-funded s…
> In other words, the IRS receives more upfront but less total in the end.
How so?
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#859Earlier 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…
> 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…
The difference between a fermentation system and software is that right now, software changes fast enough that five years is a long time.
While there are software that are still in use from five years ago, there are plenty of obsolete software no one is still using made five years ago.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#860Earlier 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…
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 loops, etc.