New Tax Law Restored Immediate R&D Expensing
Business owners can now deduct domestic research costs upfront, ending a three-year mandatory amortization period.
Updated on Oct. 5, 2026 in Taxes
Live Poll
Should federal tax policy allow immediate expensing for business investments in new technologies like AI?
The One Big Beautiful Bill Act (P.L. 119-21) permanently restored the ability for businesses to deduct domestic research and experimental expenditures immediately. This change applies to tax years beginning after December 31, 2024, replacing the capitalization rules used from 2022 to 2024.
Why it matters
The new law reverses the previous mandate that required domestic research costs to be capitalized and amortized over five years. This shift restores immediate tax relief for research and software development spending, improving cash flow for households managing business entities.
The legislation provides an immediate deduction for domestic research costs, contrasting with the five-year amortization period required between 2022 and 2024. Foreign-performed research remains subject to a 15-year capitalization schedule.
The players
Grant Thornton
An accounting and advisory firm that provides guidance on tax compliance and business regulatory changes.
The details
Under IRC section 174A, businesses must now properly classify and track research and software development costs to qualify for immediate expensing. Teams must reconcile their research credit study and accounting methods before filing to ensure all expenditures meet the specific qualifying tests. Costs for research performed outside the U.S. continue to follow the existing 15-year capitalization rules under IRC section 174.
Timeline
2022 to 2024: Domestic research costs required five-year amortization.
January 1, 2025: Immediate expensing became active for new tax years.
September 29, 2026: Grant Thornton specialists reviewed the new law.
Money Landscape
The One Big Beautiful Bill Act represents a major pivot from the previous three-year period of mandated amortization for domestic research costs. It brings tax treatment for innovation spending back into line with earlier historical norms for U.S. businesses.
Business owners should review their upcoming tax filings to ensure research and development costs are being expensed rather than amortized. Consult a qualified tax professional to reconcile your specific research credit studies with the new IRC section 174A requirements.
The takeaway
The return to immediate expensing provides a significant tax advantage for companies investing in domestic research and software. Review your project accounting methods for the current tax year to ensure full compliance with the new IRC section 174A criteria.
Further reading
For more on managing business tax obligations, visit our Taxes section.
Source note: This article includes information reported by Thomson Reuters.
Live Poll
Should federal tax policy allow immediate expensing for business investments in new technologies like AI?
