Major Tax Relief for Businesses with Research & Experimental (R&E) Costs

The renewed immediate deduction applies to eligible 2025 and later expenses, but opportunities also exist to benefit retroactively. Here are several ways to maximize your tax savings:

1. Apply the Changes Retroactively

Small businesses can amend prior tax returns (2022–2024) to claim the immediate deduction and potentially secure refunds for those years. The business must have an average annual gross receipt of $31 million or less over the past three years.

*** Amended returns must be filed by July 4, 2026.

2. Accelerate Remaining Deductions

If your company began amortizing R&E expenses in 2022, 2023, or 2024, you can deduct the remaining unamortized balance on your 2025 return — or spread it between 2025 and 2026 rather than continuing the five-year schedule.

3. Reconsider Where You Conduct Research

Under prior law, domestic research had a shorter recovery period than foreign research. With immediate expensing now restored for U.S.-based activities (and 15-year amortization still required for foreign ones), relocating qualified research operations to the U.S. could yield significant additional tax benefits.

4. Leverage the Research Credit

Remember, the R&E deduction and the research credit are separate but complementary opportunities. The deduction reduces taxable income, and the credit directly reduces tax liability, dollar-for-dollar.

You can’t claim both for the same expense and the credit has narrower eligibility rules, but combining the two strategically can substantially enhance your overall tax savings.

We Can Help You Navigate the New Rules

These R&E changes create powerful opportunities but also complex decisions. Our team can help you:

• Evaluate which years and expenses qualify

• Prepare amended returns

• Model cash flow and tax impacts

• Identify strategies to maximize both deductions and credits

Let’s discuss how these updates can strengthen your business’s tax position and support future growth.