Kia Kokalitcheva of Axios reports on a 2017 tax provision that is hurting startups in 2024.
- Full expensing for R&D costs is set to expire in 2025, which could have a series impact on innovation and economic growth.
- Starting in 2025, firms will have to amortize their R&D expenses over five years rather than immediately, which adds undue costs to the private sector and disincentivizes investments in clean technology.
- Immediate expensing is a pro-growth climate solution and should be a permanent fixture in the tax code.
“How it used to work: If a company had $1.5 million in revenue and $1 million in expenses (let’s say it was entirely domestic R&D), it would pay taxes on its $500,000 profit.
How it works now: In the same example, the company would have to amortize the $1 million in expenses over five years, so it would deduct only $200,000 (one fifth) and would pay taxes on $1.3 million in profit.”
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