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Section 174 updates: Tax treatment for Research and Experimentation (R&E) expenditures

Immediate expensing of U.S. R&D has been reinstated under new Section 174A

  • Before Dec. 31, 2021, companies could immediately deduct or amortize research and development expenditures over at least 60 months. Section 174 of the “Tax Cuts and Jobs Act” in 2017 mandated capitalization and amortization over five years for domestic research starting in 2022.
  • The “One Big Beautiful Bill Act” (PL 119-21), signed into law on July 4, 2025, allows immediate expensing of domestic R&E expenditures for tax years after 12/31/24, restoring the option for businesses to fully deduct these costs in the year incurred. It also reinstates the option to amortize domestic R&D for 60 or 120 months.

  • Eligible small businesses with capitalized domestic R&D expenses from 2022-2024 may elect a catch-up deduction or retroactively apply full expensing to tax years beginning after 2021, enabling them to amend previous returns and recover costs previously amortized.

    The U.S. National Science Foundation and its contractors do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction or when determining tax and reporting obligations.