Claim Your R&E Tax Windfall, Perhaps Before the July 6 Deadline

The R & E Tax Deduction rules have recently changed, creating opportunities for businesses to claim larger deductions or recover prior-year expenses. Your business may have a valuable opportunity to claim larger deductions or refunds for research and experimentation (R & E) expenses. Starting in 2022, businesses had to amortize domestic R & E costs over five years rather than deducting them immediately. This rule created cash-flow problems for many businesses that developed new products, improved processes, wrote custom software, or conducted experiments to advance their operations.

R & E Tax Deduction Rules and Updates

Recent tax law changes now restore more favorable treatment of domestic research expenses, effective in 2025. In many cases, you may deduct these costs in full in the year you pay or incur them. (Foreign research expenses still generally must be amortized over 15 years.)

R & E Tax Deduction Recovery Options for Prior Years

The new R & E tax deduction rules may also help you recover deductions from 2022, 2023, and 2024. Depending on your situation, you may have several tax planning options. You may choose to retain prior-year costs on their existing amortization schedule and use the new full-expensing rules from now on. This approach is simple but may delay tax benefits. Alternatively, you may deduct your remaining unamortized 2022-2024 domestic research expenses in 2025, or split the deduction between 2025 and 2026. This option may provide a significant current deduction. Careful planning around the R & E Tax Deduction rules can help businesses optimize timing and maximize available tax benefits.

Watch the July 6 Deadline

Certain small businesses may have a third option: amending 2022, 2023, and 2024 returns to claim full deductions retroactively. This option may generate refunds, but it comes with strict deadlines—generally the earlier of July 6, 2026, or the expiration of the statute of limitations for the affected return. If a year is already closed, this option may produce unfavorable results. The best path depends on your business size, filing history, income, and prior research deductions as well as whether you claimed research credits.

How We Can Help

Sterling Tax and Accounting is here to help your business with tax planning!  Our comprehensive approach to tax planning helps reduce your overall tax liability and keep more money in your pocket.  If all your accountant does is file your taxes, chances are they are making you pay more than your fair share of taxes.

Learn how to proactively save on taxes by scheduling a call with our tax planning specialists. Our tax planning, accounting & business services help you stay on track. Sterling Tax & Accounting will work with you to optimize your business and minimize your taxes. We will work to provide you and your business with the tools and resources you need to build a solid tax and business foundation. We’re a trusted CPA Firm in Sarasota, Florida. We serve clients all over the US, and proactively work to minimize their taxes. Welcome to the Sterling Standard of business!  Want to learn more?  Schedule a meeting with our tax planning team.