A provision of the Tax Cuts and Jobs Act (TCJA) took effect on January 1, 2022, requiring taxpayers to change the way they treat research and experimental (R&E) expenses. Taxpayers may no longer elect to currently deduct R&E expenses, but now must capitalize and amortize these expenditures over a five-year period (15 years if foreign-sourced). The changes made by the TCJA apply to expenses that are incurred in the taxpayer’s trade or business and represent research and experimental costs in the experimental or laboratory sense. Taxpayers must continue to amortize research and experimental expenditures under these rules even if the property with respect to which the expenditures were paid or incurred is disposed, retired or abandoned during the amortization period.
For more information, contact Melissa Howell, CPA, Principal, at 716.633.1373 or firstname.lastname@example.org.