If you are building next-generation software, scaling AI models, or engineering new tech products, the One Big Beautiful Bill Act (OBBBA) just gave the R&D tax credit a major upgrade. These changes unlock faster deductions, more cash flow, and unique strategic ways to reduce your tax bill. Here is a quick rundown of the key changes and how you can benefit.
Key Changes You Need to Know
- Immediate Deduction for U.S.-Based R&D (Starting in 2025)
The outdated 5-year amortization rule is gone. Starting in 2025, you can deduct 100% of qualifying U.S. R&D costs in the same year you incur them, putting more cash back into your operations. - Catch-Up Deductions for 2022 through 2024
If you had R&D expenses in 2022, 2023, or 2024, you may now take a one-time deduction in 2025 or spread it over 2025-2026. This can retroactively lower your taxable income. - Amending Past Returns
You may amend your 2022-2024 tax returns to apply the new rules and possibly claim refunds. We also help clients optimize Section 280C elections to balance deductions and credits for maximum savings.
What Did Not Change
Foreign R&D Still Requires 15-Year Amortization
If your R&D was done outside the U.S., those costs still need to be spread out over 15 years. These new rules only apply to research done in the U.S.
Bigger Payroll Tax Credits for More Startups
The gross receipts limit increased from $5 million to $31 million, meaning many more startups can now apply up to $500,000 of R&D credit to offset payroll taxes. This is a huge advantage for companies in early growth stages.
Form 6765 and Section G—Where Many Businesses Get It Wrong
To claim the R&D credit, businesses must file Form 6765, which now includes a new Section G requiring clear, detailed documentation of:
- What your R&D projects are focused on
- The costs involved
- The new knowledge or technical advancements being pursued
This is where we excel, breaking down complex engineering and software processes into IRS-ready documentation, ensuring you meet every requirement without draining your internal resources.
How We Help You Capture Every Credit
- Identify and separate domestic vs. foreign R&D expenses
- Review 2022-2024 R&D costs for catch-up deduction opportunities
- Advise on whether amending prior returns could generate immediate refunds
- Strategize Section 280C elections to maximize credits
- Assess eligibility under the $31M payroll credit rule
- Prepare IRS-ready documentation for Form 6765 and Section G
- Coordinate with payroll providers for Forms 8974 and 941
Case Study: How We Helped a SaaS Startup Unlock $200K in R&D Credits
A fast-growing SaaS company came to us after their previous accountant told them R&D credits were “too complicated.” They were building internal tools, optimizing cloud infrastructure, and experimenting with machine learning, but had no idea these activities qualified for tax savings.
We reviewed three years of expenses, corrected past filings, and properly documented their technical projects. The result:
- $200,000 in combined federal and payroll tax credits
- Immediate cash savings
- A clear framework they now use to track qualifying R&D going forward
This is just one example of how we turn missed opportunities into strategic wins for innovators.
Let’s Talk R&D Strategy
The new rules open up many opportunities, but they are also complex. At TS CPA, we help tech startups and innovation-driven companies take full advantage of tax credits without the hassle. Whether you are planning for 2025 or revisiting past years, we are here to help you get it right.