4 ms·

Of these, the Section 174 debacle (software R&D amortization) is arguably the problem that needs to be addressed most urgently.

guyfromfargo 2y ago
Completely agree. I am a bootstrapped SaaS owner and we cleared about $1M in revenue, $1,200 in profit, and $90k in taxes. Bootstrapping a tech company in a post Section 174 world doesn’t even seem feasible. I can’t believe this issue isn’t being taken more seriously.
- ec109685 2y ago
  Given you’ll eventually get that full software deduction tax break back, just spread across several years, I am surprised there aren’t companies that will finance that to have the money upfront (with a fee of course :( )
  - raincole 2y ago
    But most startups get broke in several years, and codebases can't be repurposed as easily as, say, a fries-making machine, so the fee need to be very high to compensate the risk.
- csomar 2y ago
  No one cares because most software developers are employed at big companies that can amortize. Even YC will probably just increase its seed instead of complain and consider it a "cost of business". This affects only marginal people. I am interested to talk with you about this if you want (feel free to reach, my email is in my profile).
  - re-thc 2y ago
    > Even YC will probably just increase its seed instead of complain Does it even impact these type of companies? 90% of the time at this stage you'll have very little income compared to expenses.
    - guyfromfargo 2y ago
      [dead]
- sethammons 2y ago
  Was that profit after taxes? Or did it cost you $88k to run the business? Did you get to pay yourself?
  - Thorrez 2y ago
    >Or did it cost you $88k to run the business? Why do you speculate that number? With $1M in revenue and $1.2k in profit, there must have been $998.8k in expenses. I assume "pay yourself" was part of the $998.8k. But I don't know the answer to the other part of your question: I don't know if the $90k in taxes are included in the $998.8k expenses.
nurple 2y ago
Couldn't agree more. In the SMEs that I've been involved with, this has had a huge chilling effect on both hiring and innovation. I think that the change is a primary contributing factor to the layoffs and offshoring that have seized the market ever since. I'm not convinced that this wasn't the intent of the change in the first place.
- csomar 2y ago
  How does this boost offshoring when offshore employees are penalized the most?
  - re-thc 2y ago
    The fix for that is to establish a subsidiary.
hosh 2y ago
It's kinda nuts how little this is taken seriously on HN. When combined with: - Pressure to make use of office spaces again, away from remote work - The AI bubble - The layoffs that started before section 174 that demonstrated how headcounts had inflated - The collapse of Silicon Valley Bank last year ... it is not looking good for software engineers in the US.
- p51-remorse 2y ago
  To be fair; the pressure to use office space again helps US workers. A lot of us don’t like it, but it’s a fair bit better than someone in Guatemala getting your job. (Better for the US engineers, not for the Guatemalan, who is probably a competent engineer himself. But the topic is the outlook for US engineers).
raincole 2y ago
Could someone elaborate this for an uninformed like me? Does it mean if you (a company) pay $1M as salary this year, only $0.2M can be treated as cost?
- zacharycohn 2y ago
  Essentially. An extremely oversimplified scenario: On paper if you made $1M in revenue, and had $1M in salary expenses that were all R&D, you would deduct $200k of that salary and be left with $800,000 in "profit" that you have to pay taxes on. Except you don't have $800k. You have $0k.
  - giancarlostoro 2y ago
    Yikes. I kept wondering why R&D has been dead for so long. I have made comments here on HN about how R&D is responsible for so many tech advancements we still use, especially at Bell Labs.
    - zacharycohn 2y ago
      This is a recent change, thanks to the 2018 tax code changes (the implementation was delayed until this tax year).
  - jimbobthrowawy 2y ago
    Why would that be counted as profit at all, if it was spent?
giancarlostoro 2y ago
The house passed a bill, but the senate is working on their own version. I havent looked too deeply at either proposal, I just hope it doesnt make it even worse. I am waiting till the final proposal gets voted on.

guyfromfargo 2y ago

Completely agree. I am a bootstrapped SaaS owner and we cleared about $1M in revenue, $1,200 in profit, and $90k in taxes. Bootstrapping a tech company in a post Section 174 world doesn’t even seem feasible. I can’t believe this issue isn’t being taken more seriously.

ec109685 2y ago
Given you’ll eventually get that full software deduction tax break back, just spread across several years, I am surprised there aren’t companies that will finance that to have the money upfront (with a fee of course :( )
- raincole 2y ago
  But most startups get broke in several years, and codebases can't be repurposed as easily as, say, a fries-making machine, so the fee need to be very high to compensate the risk.
csomar 2y ago
No one cares because most software developers are employed at big companies that can amortize. Even YC will probably just increase its seed instead of complain and consider it a "cost of business". This affects only marginal people. I am interested to talk with you about this if you want (feel free to reach, my email is in my profile).
- re-thc 2y ago
  > Even YC will probably just increase its seed instead of complain Does it even impact these type of companies? 90% of the time at this stage you'll have very little income compared to expenses.
  - guyfromfargo 2y ago
    [dead]
sethammons 2y ago
Was that profit after taxes? Or did it cost you $88k to run the business? Did you get to pay yourself?
- Thorrez 2y ago
  >Or did it cost you $88k to run the business? Why do you speculate that number? With $1M in revenue and $1.2k in profit, there must have been $998.8k in expenses. I assume "pay yourself" was part of the $998.8k. But I don't know the answer to the other part of your question: I don't know if the $90k in taxes are included in the $998.8k expenses.

nurple 2y ago

Couldn't agree more. In the SMEs that I've been involved with, this has had a huge chilling effect on both hiring and innovation. I think that the change is a primary contributing factor to the layoffs and offshoring that have seized the market ever since. I'm not convinced that this wasn't the intent of the change in the first place.

csomar 2y ago
How does this boost offshoring when offshore employees are penalized the most?
- re-thc 2y ago
  The fix for that is to establish a subsidiary.

hosh 2y ago

It's kinda nuts how little this is taken seriously on HN. When combined with: - Pressure to make use of office spaces again, away from remote work - The AI bubble - The layoffs that started before section 174 that demonstrated how headcounts had inflated - The collapse of Silicon Valley Bank last year ... it is not looking good for software engineers in the US.

p51-remorse 2y ago
To be fair; the pressure to use office space again helps US workers. A lot of us don’t like it, but it’s a fair bit better than someone in Guatemala getting your job. (Better for the US engineers, not for the Guatemalan, who is probably a competent engineer himself. But the topic is the outlook for US engineers).

raincole 2y ago

Could someone elaborate this for an uninformed like me? Does it mean if you (a company) pay $1M as salary this year, only $0.2M can be treated as cost?

zacharycohn 2y ago
Essentially. An extremely oversimplified scenario: On paper if you made $1M in revenue, and had $1M in salary expenses that were all R&D, you would deduct $200k of that salary and be left with $800,000 in "profit" that you have to pay taxes on. Except you don't have $800k. You have $0k.
- giancarlostoro 2y ago
  Yikes. I kept wondering why R&D has been dead for so long. I have made comments here on HN about how R&D is responsible for so many tech advancements we still use, especially at Bell Labs.
  - zacharycohn 2y ago
    This is a recent change, thanks to the 2018 tax code changes (the implementation was delayed until this tax year).
- jimbobthrowawy 2y ago
  Why would that be counted as profit at all, if it was spent?

giancarlostoro 2y ago

The house passed a bill, but the senate is working on their own version. I havent looked too deeply at either proposal, I just hope it doesnt make it even worse. I am waiting till the final proposal gets voted on.