The R&D tax deadline just passed. Here's what founders can still do

For four years, the tax code punished startups for building things. A rule that took effect in 2022 forced you to spread your research costs out over years instead of deducting them now, which created tax bills on companies that hadn’t made a dime. That rule is finally dead. But the window to claw back what it cost you just closed.

If you run a company that spends money on engineering or product development, this is one of the more consequential tax changes in years, and the timing matters. Here’s what changed, what deadline just passed, and what you can still do about it.

The rule that created tax bills out of thin air

A quick recap of the problem, because it’s the reason any of this matters. Starting in 2022, a change from the 2017 tax law forced companies to capitalize and amortize their research and development costs rather than deduct them in the year they were spent. Domestic R&D had to be spread over five years, foreign over fifteen.

For a profitable company, that’s an annoyance. For a pre-revenue startup, it was brutal. Imagine a company with $500,000 in revenue that spent $1,000,000 building its product. Economically, that’s a $500,000 loss. But under the old rule, you could only deduct a fraction of that R&D in year one, so on paper you might show a $400,000 profit and owe tax on it. Tax on money you didn’t make, draining runway you couldn’t spare.

What OBBBA changed

The One Big Beautiful Bill Act, signed July 4, 2025, killed that rule for domestic research. It created a new Section 174A that permanently lets you fully deduct domestic R&D in the year you spend it, for tax years beginning after December 31, 2024. No sunset, no expiration. For calendar-year companies, that means 2025 onward you’re back to deducting research when you incur it.

Going forward, you have choices for domestic R&D on your 2025 and later returns:

• Deduct it immediately in the year paid or incurred (the default).
• Capitalize and amortize it over at least 60 months.
• Elect to spread it over 10 years under a separate provision.

One thing that did not change: foreign R&D is still capitalized and amortized over 15 years. If your development work happens overseas, the relief doesn’t reach it.

The retroactive window, and the deadline that just passed

This is the part with the expired clock. OBBBA also let smaller companies go back and fix the damage from 2022 through 2024. If your business met the gross-receipts test (broadly, three-year average annual gross receipts at or under the inflation-adjusted threshold, $31 million for 2025), you could amend your 2022, 2023, and 2024 returns to expense that domestic R&D retroactively and claim refunds.

That retroactive election had a deadline: July 6, 2026. (The statute set one year from enactment; July 4 fell on a Saturday, so it rolled to the following Monday.) As of now, that window has closed. If you made the election in time, good. If you didn’t, the retroactive refund route for those years is generally gone.

One caveat worth knowing even now: the deadline was the earlier of July 6, 2026 or the normal refund statute of limitations, which is roughly three years from when you filed. For some early-filed 2022 returns, the refund window actually closed before July 6. So even people who thought they had until July may have run out sooner.

What you can still do

The deadline that passed was specifically for the retroactive small-business refund election. Plenty is still actionable:

• Get your 2025 return right. This is the first year of permanent expensing. Make sure your 2025 taxes take full advantage of immediate domestic R&D deduction rather than defaulting to the old amortization out of habit.
• Fix your ongoing method. If you’d been capitalizing R&D, you’ll want to change your accounting method to expensing going forward. The IRS laid out the procedures in Revenue Procedure 2025-28.
• Model the choice. Immediate deduction isn’t automatically best in every case. If you have net operating losses or interest-limitation issues, how you treat R&D interacts with those. This is a real conversation to have with your accountant before you file.

Frequently asked questions

Can I still claim the retroactive R&D refund for 2022-2024?

Generally no. The deadline to make the small-business retroactive election was July 6, 2026, and it has passed. For some early-filed 2022 returns, the refund statute of limitations closed even earlier. Going forward, you can still fully expense domestic R&D starting with your 2025 return.

Do I have to deduct R&D immediately now, or can I still amortize?

You have a choice for domestic R&D in tax years beginning after 2024: deduct it immediately (the default), amortize over at least 60 months, or elect a 10-year spread. Which is best depends on your losses and other tax positions, so model it with an accountant.

Does the R&D expensing change apply to foreign research?

No. Foreign R&D must still be capitalized and amortized over 15 years. Only domestic research and development qualifies for immediate expensing under the new Section 174A.

Why did the old R&D rule hurt startups so much?

Because it forced you to spread R&D deductions over years instead of taking them when you spent the money, it could create taxable income at a company that was actually losing money, draining cash from businesses that could least afford it.