{"id":1533,"date":"2025-10-02T09:15:24","date_gmt":"2025-10-02T09:15:24","guid":{"rendered":"https:\/\/leyton.majjane.agency\/us\/insights\/articles\/rd-costs-treatement-rules-what-changed-and-how-to-respond\/"},"modified":"2026-07-26T19:28:01","modified_gmt":"2026-07-26T17:28:01","slug":"rd-costs-treatement-rules-what-changed-and-how-to-respond","status":"publish","type":"article","link":"https:\/\/leyton.com\/us\/insights\/articles\/rd-costs-treatement-rules-what-changed-and-how-to-respond\/","title":{"rendered":"Updated R&#038;D Costs Treatment Rules per the OBBB &#038; Other Guidance"},"content":{"rendered":"<h2 class=\"wp-block-heading\">Tax years 2022 and Onward&nbsp;<\/h2>\n<p>Per the One Big Beautiful Bill, all U.S. companies can immediately expense domestic R&amp;D costs, starting in tax years beginning\u202f<strong>January 1, 2025<\/strong>, and onward. Company size and gross receipts levels are irrelevant in this context. Companies can, however, choose to continue to capitalize domestic R&amp;D costs and amortize them over a 5-year period.&nbsp;<\/p>\n<p>For companies who capitalized R&amp;D costs in tax years 2022 \u2013 2024, they can also accelerate all remaining amortization expenses. There are two options in this regard:&nbsp;<\/p>\n<div class=\"wp-block-leyton-orion-block-list list-block undefined\">\n<div class=\"container\">\n<div class=\"row\">\n<div class=\"col\">\n<ul>\n<li><strong>Accelerate 100%<\/strong>\u202fin 2025 <\/li>\n<li>or\u202f<strong>Split acceleration 50%\/50%<\/strong>\u202fbetween 2025 and 2026. <\/li>\n<\/ul>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<p>Foreign-based research costs follow different rules, they must still be capitalized. Companies must amortize them over 15 years. This requirement continues even in tax years 2025 and onward.&nbsp;<\/p>\n<h2 class=\"wp-block-heading\">R&amp;D Expensing Rules: Guidance for Tax Years 2022-2024&nbsp;<\/h2>\n<p>The IRS released\u202f<strong>Rev. Proc. 2025-28<\/strong>\u202fon August 28<sup>th<\/sup>, to elaborate on the points of the OBBB. This guidance clarified options for companies filing or amending returns for 2022-2024.&nbsp;<\/p>\n<h2 class=\"wp-block-heading\">Who Qualifies as an Eligible Small Business?&nbsp;<\/h2>\n<p>Only \u2018<strong>eligible small business taxpayers<\/strong>\u2018 can immediately deduct domestic R&amp;D costs for these years. These companies must pass the gross receipts test from\u202f<strong>code section 1.448-2(c)<\/strong>. The requirement:\u202f<strong>average annual gross receipts of $25 million\u202f<\/strong>or\u202f<strong>less for the three prior taxable years<\/strong>.&nbsp;<\/p>\n<p>Post-inflation adjustment changes this amount. For tax years 2022-2024, the threshold is approximately $30 million and for tax years beginning in 2025, it rises to $31 million.&nbsp;<\/p>\n<h2 class=\"wp-block-heading\">Options for Eligible Small Businesses for tax years 2022 &#8211; 2024&nbsp;<\/h2>\n<p><strong>Rev. Proc. 2025-28\u202f<\/strong>confirmed several pathways regarding treatment of R&amp;D costs in these years. Original-filed 2024 income tax returns can include full expensing of domestic R&amp;D costs, including extended filers.&nbsp;<\/p>\n<p>Companies can amend all 2022-2024 tax returns to fully expense R&amp;D costs. One critical requirement exists: treatment must be consistent across all three tax years.&nbsp;<\/p>\n<h3 class=\"wp-block-heading\">Required Documentation:<\/h3>\n<p>If a company chooses immediate expensing of R&amp;D costs on tax year 2024\u2019s filing or amendment, it must include a statement. This applies to both previous tax years\u2019 amendments as well.&nbsp;<\/p>\n<p>The statement must be titled: \u201c<strong>FILED PURSUANT TO SECTION 3.03 OF REV. PROC. 2025-28<\/strong>;\u201d and must include other basic information as described on\u202f<strong>page 22 of Rev. Proc. 2025-28<\/strong>.&nbsp;<\/p>\n<h2 class=\"wp-block-heading\">Decision Points for Companies That Capitalized R&amp;D&nbsp;<\/h2>\n<p>Companies that capitalized R&amp;D on past returns face a choice. They can amend all three years to \u2018un-capitalize\u2019 and fully deduct R&amp;D costs, or they can start fresh in tax year 2025.&nbsp;<\/p>\n<p>The latter option offers accelerated amortization. Companies can expense all remaining capitalized R&amp;D amounts faster, or choose to maintain the 5-year amortization period initially established by the Tax Cuts and Jobs Act (TCJA).&nbsp;&nbsp;<\/p>\n<h2 class=\"wp-block-heading\">Strategic R&amp;D Expensing Rules 2025 Applications&nbsp;<\/h2>\n<p>Eligible small businesses have flexibility for tax years 2022-2024. This applies to both original and amended returns.&nbsp;<\/p>\n<div class=\"wp-block-leyton-orion-block-list list-block undefined\">\n<div class=\"container\">\n<div class=\"row\">\n<div class=\"col\">\n<ul>\n<li><strong>Option 1:<\/strong>\u202fMaintain capitalization until tax year 2025. <\/li>\n<li><strong>Option 2:<\/strong>\u202fFile or amend returns while fully expensing domestic R&amp;D costs. Apply this choice consistently across all three tax years. <\/li>\n<\/ul>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<p><strong>Critical opportunity:<\/strong>\u202fEligible small businesses that didn\u2019t capitalize R&amp;D costs or claim the R&amp;D credit on original returns 2022-2024 can now amend.\u202f<strong>They can claim the R&amp;D credit and maintain full deductions.<\/strong>&nbsp;<\/p>\n<h2 class=\"wp-block-heading\">Summary of R&amp;D Expensing Rules 2025&nbsp;<\/h2>\n<p>All companies can immediately expense domestic R&amp;D costs starting in tax year 2025. Foreign-based R&amp;D costs must still be capitalized and amortized over 15 years.&nbsp;<\/p>\n<p>It\u2019s an exciting time for U.S. companies\u2019 research and development efforts to be rewarded, as the R&amp;D credit program under IRC 41 originally intended to do so!\u202f\u202f&nbsp;<\/p>\n<p><strong>Next Steps for Your Business<\/strong>&nbsp;<\/p>\n<p>Contact Leyton now to speak with our innovation experts. We can commence your R&amp;D credit study for all available tax years. Don\u2019t leave valuable tax savings on the table.&nbsp;<\/p>\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<div class=\"wp-block-buttons\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/leyton.com\/us\/schedule-a-call\/\">Contact us<\/a><\/div>\n<\/div>\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<div class=\"wp-block-leyton-orion-block-list list-block undefined\">\n<div class=\"container\">\n<div class=\"row\">\n<div class=\"col\">\n<h2>Sources<\/h2>\n<ul>\n<li><a href=\"https:\/\/www.irs.gov\/pub\/irs-drop\/rp-25-28.pdf\">IRS &#8211; Rev. Proc. 2025-28<\/a><\/li>\n<\/ul>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Tax years 2022 and Onward&nbsp; Per the One Big Beautiful Bill, all U.S. companies can immediately expense domestic R&amp;D costs, starting in tax years beginning\u202fJanuary 1, 2025, and onward. Company size and gross receipts levels are irrelevant in this context. Companies can, however, choose to continue to capitalize domestic R&amp;D costs and amortize them over [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":1534,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[75,409],"tags":[486],"expertise":[370],"class_list":["post-1533","article","type-article","status-publish","format-standard","has-post-thumbnail","hentry","category-rd-tax-credit-en","category-tax-updates-en","tag-obbb-en","expertise-innovation-funding-incentives"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.1 (Yoast SEO v28.1) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Updated R&amp;D Costs Treatment Rules per the OBBB &amp; Other Guidance - Leyton United States<\/title>\n<meta name=\"description\" content=\"Learn the new R&amp;D costs rules 2025 after the OBBB. 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