To amend or not to amend? That is the question
OBBBA and R&D Deductions: Should You Amend or Hold Off for 2024?
The One Big Beautiful Bill Act (OBBBA) gives small businesses a valuable opportunity: the ability to immediately deduct research and development (R&D) expenses incurred in 2022, 2023, and 2024. Yet, a gap in the law’s wording has left business owners uncertain about how to properly handle their 2024 tax returns.
Where the Uncertainty Lies
The statute says amended returns are required for any year “affected by the election.” This phrase has led to two competing approaches:
Play It Safe: File the original 2024 return under the old capitalization rules, then amend once the IRS clarifies the election process. Lower risk, but delayed benefit.
Take a Bold Stance: File the 2024 return claiming the full deduction up front, arguing this reflects Congress’s intent to provide immediate relief. Faster benefit, but more exposure if challenged.
Why Prior Years Matter
A common oversight is assuming you can just deduct 2024 costs on the original return. If 2022 and 2023 remain on the books with capitalized expenses, the IRS may see that as an impermissible accounting method change.
Practical Approach for Now
Until the IRS issues official instructions, the cautious move is to:
File 2024 following capitalization rules.
Watch for IRS guidance on Section 174A.
Be ready to amend 2022–2024 to claim deductions once procedures are announced.
Looking to 2025
From 2025 onward, businesses can freely deduct R&D costs again and may also “catch up” deductions from 2022–2024. For some taxpayers, waiting until then could be the simplest and least risky way forward.
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What is the R&D Tax Credit?
The Research & Experimentation Tax Credit (or R&D Tax Credit), is a general business tax credit under Internal Revenue Code section 41 for companies that incur research and development (R&D) costs in the United States. The credits are a tax incentive for performing qualified research in the United States, resulting in a credit to a tax return. For the first three years of R&D claims, 6% of the total qualified research expenses (QRE) form the gross credit. In the 4th year of claims and beyond, a base amount is calculated, and an adjusted expense line is multiplied times 14%. Click here to learn more.
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Swanson Reed is one of the only companies in the United States to exclusively focus on R&D tax credit preparation. Swanson Reed provides state and federal R&D tax credit preparation and audit services to all 50 states.
If you have any questions or need further assistance, please call or email our CEO, Damian Smyth on (800) 986-4725.
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Swanson Reed offers R&D tax credit preparation and audit services at our hourly rates of between $195 – $395 per hour. We are also able offer fixed fees and success fees in special circumstances. Learn more at https://www.swansonreed.com/about-us/research-tax-credit-consulting/our-fees/
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