A New Tax Break Could Put Thousands Back in Your Business

If your business has invested in developing new products, improving processes, creating custom software, or conducting research activities over the past few years, a significant tax opportunity may now be available.

Recent tax law changes have restored the ability for businesses to immediately deduct qualifying domestic Research & Experimentation (R&E) expenses, reversing the restrictive rules that took effect in 2022. More importantly, many businesses may now have an opportunity to recover deductions that were previously locked away under mandatory amortization rules.

For some businesses, this could mean substantial tax savings, accelerated deductions, or even refund opportunities.

What Changed?

Beginning in 2022, businesses were required to spread domestic R&E expenses over five years rather than deducting them immediately. This change reduced cash flow and delayed valuable tax benefits for companies investing in innovation.

The new legislation restores immediate expensing for domestic R&E costs beginning in 2025, allowing businesses to once again deduct eligible research expenses in the year they are incurred.

Why This Matters

Many businesses accumulated significant unamortized R&E expenses between 2022 and 2024. Under the new rules, those remaining deductions may be accelerated, potentially creating substantial tax benefits.

Depending on your situation, you may be able to:

• Continue with the existing amortization schedule

• Accelerate remaining deductions into 2025

• Amend prior-year returns to claim larger deductions and possible refunds

The right strategy depends on your business size, income projections, and tax position.

Three Potential Paths Forward

1. Continue Forward Under the New Rules

Businesses can adopt the new immediate-expensing rules for 2025 and future years while continuing to amortize prior-year R&E expenses.

This option requires the least administrative work but may leave valuable deductions spread out over future years.

2. Accelerate Remaining R&E Deductions

Businesses may elect to deduct remaining unamortized R&E expenses from 2022–2024 in 2025, or split the deduction between 2025 and 2026.

This approach can generate a substantial current-year deduction and improve cash flow without amending prior returns.

3. Amend Prior Returns for Potential Refunds

Certain small businesses may be eligible to amend 2022, 2023, and 2024 tax returns to claim immediate deductions retroactively.

This strategy can potentially generate significant refund opportunities, but strict eligibility requirements and deadlines apply.

Important Deadline Approaching

For qualifying small businesses, a critical filing deadline may apply as early as July 6, 2026, or sooner if the statute of limitations on a return has already expired.

Missing this deadline could result in lost tax benefits and reduced refund opportunities.

Businesses That May Qualify

You may benefit from these changes if your company has:

• Developed new products or services

• Created custom software

• Improved manufacturing or operational processes

• Conducted testing, experimentation, or product development

• Invested heavily in innovation between 2022 and 2025

Many businesses do not realize that everyday development activities can qualify as research expenses for tax purposes.

Don't Leave Tax Savings on the Table

The restoration of immediate R&E expensing creates a valuable opportunity for businesses that invested in innovation during the past several years.

Because the available strategies can produce dramatically different tax outcomes, business owners should carefully evaluate which approach provides the greatest benefit before filing.

Need Help Determining Your Best Option?

Our team can review your R&D activities, evaluate available deduction strategies, and help identify potential tax savings or refund opportunities before important deadlines pass.

Contact us today to explore how these new R&E tax rules could impact your business.