The One Big Beautiful Bill Act restored immediate expensing for domestic research costs — permanently. Here is what actually changed, what did not, and the deadline that has already passed.
The four-year detour is over. Under the One Big Beautiful Bill Act (Public Law 119-21, enacted July 4, 2025), domestic research and experimental expenditures are once again deductible in the year they are incurred — and this time the treatment is permanent rather than scheduled to expire.
The short version
- Domestic research costs: immediately deductible, under new §174A, for tax years beginning after December 31, 2024.
- Foreign research costs: unchanged, still amortized over fifteen years. The domestic / foreign distinction is now the single most consequential line in your R&D accounting.
- The §41 research credit: unchanged. It was never repealed, never suspended, and remains a dollar-for-dollar credit against tax.
Why this is a bigger deal for small businesses than for large ones
A large company with steady profits absorbed the amortization rule as a timing difference. It hurt cash flow and it annoyed the finance team, but the deductions eventually arrived.
A small business does not have that cushion. Between 2022 and 2024 we sat with owners whose tax bills had roughly doubled on flat revenue, purely because engineering payroll had become a five-year deduction. Some of them cut projects. That is the outcome the rule was never designed to produce, and it is the outcome this change reverses.
The deadline that has already gone
There was a limited mechanism allowing eligible small businesses — broadly, those under the $31 million average gross receipts threshold — to apply §174A retroactively to the 2022 through 2024 tax years by amending those returns. That election operated under its own procedural deadline in mid-2026, and that window has now closed.
We mention it because the internet has not caught up. There is a good deal of advisory content still circulating that describes the retroactive amendment as an open opportunity. It is not. Anyone telling you otherwise in the second half of 2026 has not checked their sources recently.
What is still open is the ordinary look-back on the §41 credit itself, which generally reaches three open tax years. That is a different rule with a different deadline, and for a business that has never claimed the credit, it is usually where the real money is.
What to do about it
If your business designs, builds, tests or improves products, processes, formulas or software, two questions are worth answering this year:
- Are you deducting domestic research costs currently, as §174A now permits?
- Have you ever actually claimed the §41 credit — and if not, how many open years are still within reach?
Those are questions we answer at no cost, before you commit to anything. If the answer is that there is nothing here for you, we will say so.