Tax
R&D Deduction Changes
Good news for startups: a new law lets you fully deduct domestic R&D expenses upfront again — reversing the 2017 rule that forced five-year amortization. Founders can even reclaim past costs for 2022 and 2023, boosting cash flow and runway. If you’ve been amortizing R&D, talk to your accountant now and make sure your books are tax-ready.
Jul 9, 2025
Big Win for Startups: R&D Deduction Changes You Need to Know
If you’re an early-stage founder burning through cash to build something innovative, there’s some genuinely good tax news coming your way.
Let’s break it down simply:
What changed?
In 2017, Trump’s Tax Cuts and Jobs Act quietly slipped in a painful twist for startups: it forced companies to spread ("amortize") their R&D expenses over five years (or 15 for overseas R&D) instead of deducting them all at once. This change kicked in for tax year 2022, catching a lot of founders off guard. Suddenly, startups that were used to writing off huge R&D costs upfront found themselves with bigger taxable income and bigger tax bills — even if they were still pre-revenue.
What’s the good news?
A new bill just rolled back that change — at least for domestic R&D spending. Now, startups can once again fully deduct their qualified U.S. R&D expenses in the year they’re incurred. Even better, the new law lets you retroactively recover costs you were forced to amortize for 2022 and beyond.
Why does this matter?
For early-stage SaaS founders, R&D is the heartbeat of your business. It’s your engineers, your product team, your experiments. Being able to expense that work immediately means:
- Lower taxable income: Keep more cash in the business instead of sending it to the IRS.
- Better runway: More cash on hand extends how long you can operate before your next raise.
- Cleaner financials: Easier forecasting and fewer nasty surprises when tax season rolls around.
What should you do now?
If you amortized R&D costs in 2022 or 2023, talk to your accountant ASAP. You may be able to amend those returns and get money back. Going forward, make sure your bookkeeping captures all qualified R&D expenses clearly, so you get every dollar you’re entitled to deduct.
This is exactly the kind of tax nuance that trips up early-stage founders — and why having startup-savvy bookkeeping in place is a game changer.
Need help untangling your R&D expenses? We help founders keep their books investor-ready, runway-aware, and tax-smart — so you can stay focused on building.
