Comment by jedberg
3 years ago
I have a tax pro for this very reason, but my understanding is that you have a choice on how you want the tax treatment -- you can deduct it now as a business expense or over five years as R&D, which gives you a better tax deduction in the long run but fewer up front benefits. But at the end of the day I pay the tax guy to worry about it for me.
Did you talk to them about this specific change recently? Because how you're describing it is how it used to work, just not starting this year.
Also thanks for Reddit ;)
I admittedly have not talked about this with them. I assume he would tell me if it ends up making a difference, but maybe he'll just surprise me in April!
You don't have a choice anymore. It's required to be amortized as of FY22. I had the same conversation with my CPA in January.
To make matters worse, failed or abandoned R&D projects can also no longer be written off, and must also be amortized even though they resulted in no new products or innovations. All of these changes greatly increase the risk of new R&D projects. It's an absolute disaster for innovation in a time when the US is ostensibly entering into a great-powers competition with China.