The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, is a game-changer for American businesses pushing the boundaries of innovation. By repealing the Section 174 amortization requirements for domestic research and experimental (R&E) expenses, it restores immediate expensing for domestic R&D in tax years beginning after December 31, 2024—putting more cash back in the pocket of businesses, to fuel growth and help them stay competitive. This shift not only restores the value of Section 41 R&D tax credits for many companies but also addresses the cash flow headaches caused by Section 174 R&D amortization requirements that have plagued innovators since 2022. Yet, with all the buzz on social media and in tax circles, myths are spreading faster than ever—leading to confusion that could cost you deductions, credits, and trigger unnecessary stress.
If you're wondering about "OBBBA Section 174 repeal details," "R&D tax credit myths 2025," or "how to claim retroactive R&D expensing," you've come to the right place. We'll break down the facts, debunk the top misconceptions, and arm you with actionable steps to maximize these benefits for your business.
Myth 1: Every Business Can Retroactively Amend Returns for 2022–2024 and Get Instant Refunds
You've probably seen posts claiming OBBBA lets anyone rewind the clock on past taxes. It's an appealing idea, but it's not that simple.
The Reality: Relief relief via retroactive cash refunds from amending returns (for 2022 - 2024) is limited to small businesses meeting the $31 million annual gross receipts threshold (averaged over three years). If you're over $31M in average annual gross receipts, you can't amend prior years but can accelerate those unamortized deductions starting in 2025. Learn how to calculate your company’s average annual gross receipts to see if it meets the requirements for retroactive expensing.
Pending IRS guidance may clarify if unfiled 2024 returns can incorporate the election without amending—consult a pro to avoid missteps and maximize refunds. Pro Tip: If eligible, act before the July 4, 2026, deadline to elect this— it could mean real cash back for reinvesting in your team or tech.
Myth 2: OBBBA Wipes Out Amortization for All R&D Expenses, Including Foreign and Software Dev
Many assume the repeal is a blanket fix, covering everything from overseas projects to custom software builds in the US.
The Reality: Only domestic R&E gets immediate expense treatment under new Section 174, subsection A—foreign costs are still required to be amortized over 15 years. Software development qualifies as R&E, but you'll need to prorate based on where the work happens (e.g., U.S. coders count as domestic). This setup encourages keeping innovation stateside, though it doesn't erase all offshoring edges. For global teams, precise allocation is key to unlocking full benefits.
Myth 3: R&D Tax Credits Are Just for Big Tech Giants or Revolutionary Breakthroughs
This old misconception lingers, making many overlook credits that could slash their tax bill.
The Reality: Section 41 credits are open to businesses of all sizes innovating in everyday ways—like refining processes, building prototypes, or tweaking software—as long as they pass the four-part test (technological nature, discovery, experimentation, business purpose). The OBBBA makes them even more attractive by syncing with full expensing for R&D costs, and startups can offset up to $500,000 in payroll taxes if under five years old and below $5 million in annual receipts.
Myth 4: Filing for These Credits or Deductions Post-OBBBA Guarantees an IRS Audit
Audit fears are everywhere online, but they're often overblown.
The Reality: Claims don't automatically trigger R&D credit audits (corporate audit rates hover around 0.9%), but solid documentation—like time logs, payroll records, project notes, and invoices—goes a long way to reduce any risk. OBBBA streamlines things with better Section 280C coordination, and compliant filers are having success. Focus on reasonable substantiation, not perfection. Bringing in experts for a study can make your case ironclad.
Note that the term “audit” here is not in reference to a full-blown review of corporate tax returns and deductions, but is simply in reference to a review of a company’s R&D tax credit filing. Fortunately, all Strike Tax clients receive the benefit of unlimited audit support services when they choose Strike to handle their R&D tax credit study and filings, so in the rare event of an audit, there are no additional headaches or fees.
Myth 5: OBBBA Won't Really Fix Offshoring or Spark a Hiring Boom in Tech and Manufacturing
Skeptics say it's too little, too late for reversing trends like layoffs or moving R&D abroad.
The Reality: By eliminating the domestic amortization penalty, OBBBA levels the playing field, making U.S.-based innovation more tax-efficient and potentially boosting domestic hiring as cash flows improve—experts forecast rebounds by 2026. That said, results hinge on broader market factors; it's a strong incentive, not a silver bullet.
Myth 6: You Need Mountains of Paperwork to Qualify, or You're Out of Luck
The idea of "exhaustive documentation" scares off plenty of eligible businesses.
The Reality: While records are crucial for backing claims, there's no one-size-fits-all checklist—project emails, payroll data, and notes often do the trick if they show your R&D efforts. OBBBA eases the burden by ending amortization tracking, making it simpler for all companies.
Myth 7: You Can Claim the Full R&D Credit and Deduction Without Any Trade-Offs Under Section 280C
"Double dipping" sounds great, but it's a common trap.
The Reality: Section 280C prevents over-benefiting—claim the full credit, and you reduce your R&D deduction by that amount; or elect a reduced credit (usually 65%) to keep the full deduction. OBBBA doesn't change this but makes coordination smoother with expensing restored. Weigh your options based on your tax position for the best savings.
Ready to Capitalize on OBBBA? Let Strike Tax Advisory Guide You
Don't miss out on these opportunities to supercharge your innovation and bottom line—myths aside, OBBBA is built for businesses like yours. Reach out for a no-obligation chat; we'll review your eligibility, handle amendments, and optimize your R&D strategy. For more information, read our latest blog on 174 Amortization Repeal.
