Section 174 Overview
As part of the Tax Cuts and Jobs Act, taxpayers no longer had the option of expensing Section 174 costs and were required to amortize them for tax years beginning after December 31, 2021. Section 174 costs include not only expenses included in the R&D Credit, but other costs related to research and development as well. With the passage of the “Big Beautiful Bill”, taxpayers will once again have the option to fully expense their 174 costs for tax years beginning after December 31, 2024, and going forward. Additionally, taxpayers have the option to accelerate the remaining 2022 through 2024 deductions on their 2025 and 2026 returns. Certain small taxpayers can also amend their 2022 through 2024 tax returns to claim 100% of the 174 costs for those years.
Additionally, many taxpayers that opted not to claim the R&D credit in recent years due to Section 174 uncertainty now face an opportunity to amend returns and claim previously unrecognized credits. This allows taxpayers to maximize tax credits and minimize penalties, all with IRS-favorable treatment.
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Resources
- Podcast
- Webinar
- In The News
Strengthening Client R&D Tax Credit Claims: Key Areas Often Overlooked
On Let’s Talk Tax, host TJ Sponsel and guest Audrey Asfoor discuss the intricacies of R&D tax credit documentation. This episode delves into the importance of proper documentation, the challenges faced by various industries, and the benefits of on-site fieldwork for clients.
R&D in the Wake of Reform: What the New Law Means for Credit Claims, Compliance & Strategy
In this webinar, Tanner Niehaus, CPA, and David Seibel, EA provide an overview of how the “Big Beautiful Bill” reshapes Section 174 and R&D tax credit planning, emphasizing the need for stronger documentation and strategic compliance amid increased IRS scrutiny and changes to Form 6765, including the new Section G. It also examines evolving state-level credit rules, offering actionable strategies to help advisors guide clients through both federal and state R&D compliance.
Is the R&D Credit 280C election still relevant?
There has been much discussion recently regarding the Tax Cuts and Jobs Act Section 174 amortization requirement that took effect for tax years beginning after Dec. 31, 2021.
Because of this provision, taxpayers are now required to amortize their research expenditures over five years for domestic costs and 15 years for foreign research costs. However, a conforming amendment in Section 280C has the potential to provide a much-needed boost to those companies that also claim the Section 41 R&D Credit.
How McGuire Sponsel Can Help
Proactive and strategic planning is critical in guiding clients through this change. If you or your clients need assistance or perspective on how to proceed, our R&D Tax Credit team at McGuire Sponsel has the technical expertise in both IRC 174 and IRC 41, and can assist in helping your clients navigate through this law change.
Recent Resources
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blogR&D Tax Credit ServicesOctober 21, 2025Michigan Decouples from 174A, Research Costs Must Be Amortized
by David Seibel, EAMichigan has decoupled from Section 174A. Learn how new rules require research costs to be amortized and what this means...
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blogR&D Tax Credit ServicesOctober 1, 2025
Beyond Small Business Relief: What Rev. Proc. 2025-28 Means for Taxpayers and CPAs
by David Seibel, EADiscover how IRS Rev. Proc. 2025-28 impacts Section 174 expensing, 280C elections, and accelerated deductions — key strategies for CPAs...
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blogR&D Tax Credit ServicesAugust 29, 2025
IRS Provides Guidance on 2024 R&D Expensing Rules for Eligible Small Businesses
by David Seibel, EARevenue Procedure 2025-28 provides long-awaited clarity for small businesses on the retroactive Section 174A election, allowing them to deduct 2024...
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white papersR&D Tax Credit ServicesAugust 28, 2025The 174 Fix
by David Seibel, EA“Big Beautiful Bill” aims to reinstate the full expensing of IRC §174 expenditures beginning in 2025. This creates a unique...