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Love this note. For those interested, this is the Tax Cuts and Jobs Act (TCJA) of 2017 Section 179. For a software engineering business, the Tax Cuts and Jobs

Love this note. For those interested, this is the Tax Cuts and Jobs Act (TCJA) of 2017 Section 179. For a software engineering business, the Tax Cuts and Jobs Act (TCJA) of 2017 significantly impacted how software costs can be expensed under Section 179. While Section 179 previously allowed for the immediate expensing of many software purchases, TCJA reforms restricted this deduction primarily to "off-the-shelf" software. Custom-developed software and internal development costs are no longer eligible for Section 179 expensing and must now be capitalized and amortized. Under the TCJA, Section 179 cannot be used for software that a company develops for itself. This includes the direct costs for the engineers, programmers, and other personnel involved in the development process. The report not addressing this elephant in the room is a disappointing.

kevindamm 1y ago
I think it may have been a one-two punch of §174 and the end of ZIRP. Of note, the OBBB reinstated the ability to deduct R&D, so businesses are no longer required to capitalize and amortize R&D expenses (including software development). https://warrenaverett.com/insights/one-big-beautiful-bill-section-174-research-development/ https://warrenaverett.com/insights/one-big-beautiful-bill-se...
- deleted 1y ago
  [deleted]
- lisbbb 1y ago
  I was talking about zirp in another thread and got downvoted. But yes, companies were taking out low/zero interest loans and hiring people in hopes of making 1-2% on it, which worked for awhile. It doesn't work at 4-5%, though. We can't pin our hopes to zirp anyways. But a lot of sketchy activities around investing were accomplished because of zirp.
silisili 1y ago
Section 174 was the big one that affected how SE salaries could be deducted, that many blamed for the start of layoffs. However, that's back for tax year 2025, so why aren't we seeing the jobs come back? Maybe it really was 174 then, but AI now?
- MontyCarloHall 1y ago
  >why aren't we seeing the jobs come back? It was only just reinstated, so it's probably too early to see the effects. I also expect that despite the restoration of Section 174, companies realized that they not only overhired during ZIRP, but also that they don't actually need that headcount, given the outcome of Musk's Twitter layoffs. There were so many prognostications that Twitter would imminently implode after downsizing from ~8k to ~1.5k employees, and when these claims never came to pass, it was a wake-up call to the rest of the industry [0]. [0] https://www.livemint.com/companies/news/elon-musk-fired-80-percent-of-twitter-x-silicon-valley-companies-meta-amazon-google-microsoft-adopted-practice-report-11718252374022.html https://www.livemint.com/companies/news/elon-musk-fired-80-p...
  - cyberax 1y ago
    I don't think many people really doubted that Twitter could keep itself up and running. But that "everything app"? It hasn't happened. The money transfer app ("Twitter Payment Platform")? Still MIA.
    - MontyCarloHall 1y ago
      >I don't think many people really doubted that Twitter could keep itself up and running. Oh, they sure did: https://news.ycombinator.com/item?id=34617964 https://news.ycombinator.com/item?id=34617964 Even in that thread, a lot of people were saying "it's only been three months, give it a bit more time."
      - cyberax 1y ago
        And they were right, I think. Twitter's UI has degraded. I can't see this tweet linked from the thread: https://x.com/Grady_Booch/status/1620720537805922306 https://x.com/Grady_Booch/status/1620720537805922306 - it gives me an error. It might have been deleted, but Twitter just says "something went wrong". And I don't think it's even possible to view threads anymore without logging in? But more importantly, X has not released any substantially new features within the last 3 years. And I bet that it won't release anything new for a while, and anything they _do_ try to release will be laughably broken.
ivewonyoung 1y ago
Those changes got permanently reversed in the recent passage of the Big Beautiful Bill by a one-in-a-year reconciliation process that was able to pass with only 51 votes in the Senate with zero votes from the opposition. Note that the reversal only applies to American software jobs, not offshore ones. So maybe tech hiring is going to pick up again soon. Those changes should've been reversed before they took effect in 2022 by the govt at the time.
tru3_power 1y ago
What was the reasoning behind this change? Isn’t R&D something we’d encourage to be a tax write off since it reduces the cost of well.. R&D? Or is R&D not as important as I’m thinking?
- rcpt 1y ago
  That administration really didn't like tech
  - WillPostForFood 1y ago
    Why do you think they brought it back this year?
    - neutronicus 1y ago
      Presumably because they see the tech industry as having been brought sufficiently to heel.
    - shagie 1y ago
      It was also in part a budgetary time bomb that was set to go off in the next term. If Trump won, they would have rolled it back. As it was, there were several attempts to roll it back between 2021 and 2024 that were blocked by republicans ( https://www.claconnect.com/en/resources/blogs/manufacturing/senate-blocks-section-174-fix-leaving-taxpayers-dismayed-yet-again https://www.claconnect.com/en/resources/blogs/manufacturing/... https://thehill.com/homenews/senate/4737635-senate-republicans-block-expansion-child-tax-credit/ https://thehill.com/homenews/senate/4737635-senate-republica... ) so that the economy would continue to suffer under Biden. Once Trump won and was in place for 2025, they defused it so that (they hoped) the economy would pick up.
    - TuringNYC 1y ago
      >> Why do you think they brought it back this year? Huge amounts of coordinated lobbying by the tech industry concentrated on three topics (crypto, section 179, ai deregulation)
- 1y ago

kevindamm 1y ago

I think it may have been a one-two punch of §174 and the end of ZIRP. Of note, the OBBB reinstated the ability to deduct R&D, so businesses are no longer required to capitalize and amortize R&D expenses (including software development). https://warrenaverett.com/insights/one-big-beautiful-bill-section-174-research-development/ https://warrenaverett.com/insights/one-big-beautiful-bill-se...

deleted 1y ago
[deleted]
lisbbb 1y ago
I was talking about zirp in another thread and got downvoted. But yes, companies were taking out low/zero interest loans and hiring people in hopes of making 1-2% on it, which worked for awhile. It doesn't work at 4-5%, though. We can't pin our hopes to zirp anyways. But a lot of sketchy activities around investing were accomplished because of zirp.

silisili 1y ago

Section 174 was the big one that affected how SE salaries could be deducted, that many blamed for the start of layoffs. However, that's back for tax year 2025, so why aren't we seeing the jobs come back? Maybe it really was 174 then, but AI now?

MontyCarloHall 1y ago
>why aren't we seeing the jobs come back? It was only just reinstated, so it's probably too early to see the effects. I also expect that despite the restoration of Section 174, companies realized that they not only overhired during ZIRP, but also that they don't actually need that headcount, given the outcome of Musk's Twitter layoffs. There were so many prognostications that Twitter would imminently implode after downsizing from ~8k to ~1.5k employees, and when these claims never came to pass, it was a wake-up call to the rest of the industry [0]. [0] https://www.livemint.com/companies/news/elon-musk-fired-80-percent-of-twitter-x-silicon-valley-companies-meta-amazon-google-microsoft-adopted-practice-report-11718252374022.html https://www.livemint.com/companies/news/elon-musk-fired-80-p...
- cyberax 1y ago
  I don't think many people really doubted that Twitter could keep itself up and running. But that "everything app"? It hasn't happened. The money transfer app ("Twitter Payment Platform")? Still MIA.
  - MontyCarloHall 1y ago
    >I don't think many people really doubted that Twitter could keep itself up and running. Oh, they sure did: https://news.ycombinator.com/item?id=34617964 https://news.ycombinator.com/item?id=34617964 Even in that thread, a lot of people were saying "it's only been three months, give it a bit more time."
    - cyberax 1y ago
      And they were right, I think. Twitter's UI has degraded. I can't see this tweet linked from the thread: https://x.com/Grady_Booch/status/1620720537805922306 https://x.com/Grady_Booch/status/1620720537805922306 - it gives me an error. It might have been deleted, but Twitter just says "something went wrong". And I don't think it's even possible to view threads anymore without logging in? But more importantly, X has not released any substantially new features within the last 3 years. And I bet that it won't release anything new for a while, and anything they _do_ try to release will be laughably broken.

ivewonyoung 1y ago

Those changes got permanently reversed in the recent passage of the Big Beautiful Bill by a one-in-a-year reconciliation process that was able to pass with only 51 votes in the Senate with zero votes from the opposition. Note that the reversal only applies to American software jobs, not offshore ones. So maybe tech hiring is going to pick up again soon. Those changes should've been reversed before they took effect in 2022 by the govt at the time.

tru3_power 1y ago

What was the reasoning behind this change? Isn’t R&D something we’d encourage to be a tax write off since it reduces the cost of well.. R&D? Or is R&D not as important as I’m thinking?

rcpt 1y ago
That administration really didn't like tech
- WillPostForFood 1y ago
  Why do you think they brought it back this year?
  - neutronicus 1y ago
    Presumably because they see the tech industry as having been brought sufficiently to heel.
  - shagie 1y ago
    It was also in part a budgetary time bomb that was set to go off in the next term. If Trump won, they would have rolled it back. As it was, there were several attempts to roll it back between 2021 and 2024 that were blocked by republicans ( https://www.claconnect.com/en/resources/blogs/manufacturing/senate-blocks-section-174-fix-leaving-taxpayers-dismayed-yet-again https://www.claconnect.com/en/resources/blogs/manufacturing/... https://thehill.com/homenews/senate/4737635-senate-republicans-block-expansion-child-tax-credit/ https://thehill.com/homenews/senate/4737635-senate-republica... ) so that the economy would continue to suffer under Biden. Once Trump won and was in place for 2025, they defused it so that (they hoped) the economy would pick up.
  - TuringNYC 1y ago
    >> Why do you think they brought it back this year? Huge amounts of coordinated lobbying by the tech industry concentrated on three topics (crypto, section 179, ai deregulation)
1y ago