Understanding Updates To Section 174

You’ve most likely heard of Section 174, Research and Experimental Capitalization and Amortization, that went into effect in 2022. While it is not applicable to all businesses, it does affect many SaaS and other companies performing research and experimentation activities.

There is currently a bill in Congress, “Tax Relief for American Families and Workers Act of 2024” that could make changes to this law.  The bill aims to provide tax relief to individuals and families, but its impact on businesses and startups could involve changes to corporate tax rates, deductions, and credits.

The bill passed the House back in January with overwhelming support but has been held up in the Senate since.  We don’t know if or when this bill will pass as there are many other provisions included that could stall the passing.  

Because of this uncertainty, many people are wondering whether they should extend their tax return deadlines. The answer depends on whether Section 174 applies to your business. If it does, you might be eligible for the Research and Development (R&D) Tax Credit, which could provide you with cash benefits, especially if you qualify for the payroll offset. Essentially, if you don’t submit your taxes now, you could be missing out on money that you're entitled to receive now.

To help you navigate this situation, we've put together a guide summarizing Section 174 and addressing common questions you may have. If you need further clarification, feel free to reach out to us at terri@zeni.ai