R&D §174 Amortization Calculator 2026
TCJA changed Section 174 from immediate deduction to mandatory capitalization: 5-year amortization for domestic R&D, 15-year for foreign. OBBB (P.L. 119-21) partially reversed this in 2025+ allowing immediate deduction for domestic only — but pre-2025 amortization continues until done. Tax planning for 2024-2026 transition is complex.
How §174 Changed Under TCJA
Pre-2022: R&D was immediately deductible under §174. TCJA forced capitalization starting Jan 2022: 5-year amortization for domestic R&D, 15-year for foreign. Mid-year convention applied — first year and last year get half-year deduction. Impact: businesses paid significantly higher 2022-2024 taxes because spending was front-loaded but deductions stretched over 5-15 years.
OBBB Partial Restoration
OBBB (P.L. 119-21) signed July 2025 restored immediate domestic R&D deduction starting in 2026. Foreign R&D capitalization unchanged (15-year amortization continues). Pre-2025 amortization schedules continue unchanged — companies cannot accelerate remaining amortization. New domestic R&D from 2026 onward is fully deductible in year incurred.
Tax Planning for 2024-2026 Transition
Three considerations: (1) Pre-2025 amortization schedules locked in — domestic R&D capitalized in 2022-2024 still amortizes 5 years from inception. (2) 2026+ domestic R&D fully deductible — accelerate planned R&D into 2026 if cash flow allows. (3) Foreign R&D capitalization continues — review whether to onshore R&D activities to qualify for immediate deduction. Coordinate with tax provider for transition election.
Source: IRC §174, TCJA §13206, OBBB (P.L. 119-21) §70302, Rev. Proc. 2024-09. Last updated: May 2026.