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No, you pay taxes on profits. What this does is reduce your upfront deduction.
by testrun 1y ago
No, you pay taxes on profits. What this does is reduce your upfront deduction.
- epr 1y agoYes, but the main thing here is that ALL software development is now "profit" in the short term. In theory you've developed a capital good that benefits you over time, hence the amortization. Simplified 2021 example before 174: 100k Revenue 100k Software Dev Costs No profit or tax Simplified 2022 example after 174: 100k Revenue 100k Software Dev Costs 90k "profit" 18.9k taxes Above example is year one of suddenly having these taxes, because if your software costs are the same or lower over time it gets easier. It's just extremely painful for smaller and especially fast growing companies like startups without a lot of cash, especially when interest rates are so high. Accountants: If I am wrong about the above, please correct me
- testrun 1y agoThe profit is 80k, not 90k, but the principle is correct. This will affect cash flow.