Proposed 2025 Tax Bill could lead to Section 174 Changes

R&D Tax Credits | May 28, 2025 | 1 min read

Big Changes Could Be Coming to Section 174: What It Means for R&D Tax Credit Claims 

As the proposed 2025 tax bill is currently making its way through the legislative process, there are a few aspects that would directly impact innovative businesses investing in research and development. One of the most talked-about provisions is a potential suspension of the widely discussed Section 174 capitalization rule.

If passed, the bill would temporarily allow full deductibility of domestic R&D expenses for tax years 2025 through 2029. This is a major shift from the current requirement that businesses capitalize and amortize these expenses over five years; a change that has been a major talking point for many since it took effect in 2022.

While this is good news for the future, the real opportunity lies in what businesses can do right now. Thanks to this proposed bill, there’s a window to retroactively maximize R&D tax credits and deductions.

Why Act Now?

To fully benefit, companies will need to:

  • Complete R&D studies for 2022, 2023, and 2024

  • Amend 2022 and 2023 tax returns (and often the business owner’s return as well)

  • Possibly amend 2024 tax returns too (if the R&D study isn’t completed before filing)

Keep in mind: the statute of limitations for 2022 returns starts expiring in March 2026 for calendar-year filers. That may sound far off, but the process, especially for three years’ worth of amended filings, takes time.

For the average R&D tax credit customer, the potential three-year benefit is about $400,000. That’s a significant amount of cash flow that could be reinvested in more innovation, hiring, or scaling operations.

Bottom Line

This tax bill offers hope that the previous R&D tax treatment could return soon. But even before it passes, businesses have a chance to recapture value lost under the current Section 174 rules. Acting now, before the window closes, could mean hundreds of thousands in tax savings.

The Clarus team of tax experts is here to help! We offer free consultations to walk through your specific situation and identify how your business can maximize the R&D tax credit under both current law and proposed changes.

If your business is investing in innovation, don’t wait. The sooner you begin the process, the more you stand to gain.

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ABOUT CLARUS R+DWith custom software backed by a team of tax experts, Clarus R+D specializes in tax credits for growth businesses. Our technology-driven solution simplifies the process, maximizes benefit, and ensures compliance. We partner with accounting firms, financial advisors, investors, payroll providers, and more.

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