4 ms·

I’m confused why this is so impactful. If you have software devs, even if you don’t classify as R&D, you can deduct their full salaries, right?

by minton 3y ago

hobofan 3y ago
How would you classify software _developers_ if not under Research & _Development_?
- kody 3y ago
  "Hey boss, can you go ahead and change my job title to Code Janitor?"
  - EdwardDiego 3y ago
    so, we've decided to promote you to Principal Monkey With a Typewriter, we expect Hamlet any day now.
- icedchai 3y ago
  We'll call them "sustaining engineers" and define most features as "bug fixes." Problem solved.
  - selimthegrim 3y ago
    If you call them sustaining members maybe you can ask CPB, PRI and NPR for tax advice.
- chipweinberger 3y ago
  its R&E (experimentation), not R&D.
agwa 3y ago
No, the law defines all software development costs as R&D (technically "R&E") for the purposes of requiring capitalization: https://www.law.cornell.edu/uscode/text/26/174 https://www.law.cornell.edu/uscode/text/26/174 (c)(3) This is regardless of whether you classify the costs as R&D for the purpose of claiming a tax credit under Section 163.
- nicksergeant 3y ago
  No, what you linked to there specifically says that "In the case of a taxpayer’s specified research or experimental expenditures for any taxable year", _then_ any software development is classified as R&D for the purpose of requiring capitalization. I don't see anywhere saying that _any and all software development_ is considered "research or experimental". Ie., if some company pays you to build a piece of software and you hand it over when you're done, you were not engaged in research/experimental expenditures if you paid people to build said software.
  - Gormo 3y ago
    > Ie., if some company pays you to build a piece of software and you hand it over when you're done, you were not engaged in research/experimental expenditures if you paid people to build said software. Then it's your customer's R&D, and they have to amortize their payment to you. If you're doing outsourced software development for SMBs and startups, you might not be directly taxed under this rule, but your customers are, which significantly affects the market for your services.
    - nicksergeant 3y ago
      Absolutely true! It's a burden on our clients for sure, and something I'll be sure to make them aware of before signing on (presuming this section doesn't get unturned in the near future...)
  - elicksaur 3y ago
    The link literally says that: > For purposes of this section, any amount paid or incurred in connection with the development of any software shall be treated as a research or experimental expenditure.
    - nicksergeant 3y ago
      Yes, "For purposes of this section" meaning "Section 174", which is about: > (a)In general > In the case of a taxpayer’s specified research or experimental expenditures for any taxable year— So if you are not doing "research or experimental expenditures", all of the specifications in this section do not apply to you.

I’m confused why this is so impactful. If you have software devs, even if you don’t classify as R&D, you can deduct their full salaries, right?

by minton 3y ago

I’m confused why this is so impactful. If you have software devs, even if you don’t classify as R&D, you can deduct their full salaries, right?

hobofan 3y ago

How would you classify software _developers_ if not under Research & _Development_?

kody 3y ago
"Hey boss, can you go ahead and change my job title to Code Janitor?"
- EdwardDiego 3y ago
  so, we've decided to promote you to Principal Monkey With a Typewriter, we expect Hamlet any day now.
icedchai 3y ago
We'll call them "sustaining engineers" and define most features as "bug fixes." Problem solved.
- selimthegrim 3y ago
  If you call them sustaining members maybe you can ask CPB, PRI and NPR for tax advice.
chipweinberger 3y ago
its R&E (experimentation), not R&D.

agwa 3y ago

No, the law defines all software development costs as R&D (technically "R&E") for the purposes of requiring capitalization: https://www.law.cornell.edu/uscode/text/26/174 https://www.law.cornell.edu/uscode/text/26/174 (c)(3) This is regardless of whether you classify the costs as R&D for the purpose of claiming a tax credit under Section 163.

nicksergeant 3y ago
No, what you linked to there specifically says that "In the case of a taxpayer’s specified research or experimental expenditures for any taxable year", _then_ any software development is classified as R&D for the purpose of requiring capitalization. I don't see anywhere saying that _any and all software development_ is considered "research or experimental". Ie., if some company pays you to build a piece of software and you hand it over when you're done, you were not engaged in research/experimental expenditures if you paid people to build said software.
- Gormo 3y ago
  > Ie., if some company pays you to build a piece of software and you hand it over when you're done, you were not engaged in research/experimental expenditures if you paid people to build said software. Then it's your customer's R&D, and they have to amortize their payment to you. If you're doing outsourced software development for SMBs and startups, you might not be directly taxed under this rule, but your customers are, which significantly affects the market for your services.
  - nicksergeant 3y ago
    Absolutely true! It's a burden on our clients for sure, and something I'll be sure to make them aware of before signing on (presuming this section doesn't get unturned in the near future...)
- elicksaur 3y ago
  The link literally says that: > For purposes of this section, any amount paid or incurred in connection with the development of any software shall be treated as a research or experimental expenditure.
  - nicksergeant 3y ago
    Yes, "For purposes of this section" meaning "Section 174", which is about: > (a)In general > In the case of a taxpayer’s specified research or experimental expenditures for any taxable year— So if you are not doing "research or experimental expenditures", all of the specifications in this section do not apply to you.