On July 4, 2025, President Trump signed the One, Big, Beautiful Bill (OBBBA) into law. While most headlines focused on the rollback of clean energy incentives, the bill delivered a quiet but significant win for businesses investing in innovation.
With improved expensing rules and refund opportunities for small businesses, the BBB represents one of the most favorable updates to R&D tax treatment in recent years. Here’s what changed—and how your business can benefit.
Since 2022, domestic R&D costs have been subject to mandatory capitalization and five-year amortization under Section 174. That meant even pre-revenue startups had to defer deductions, putting pressure on cash flow and complicating tax planning. Foreign R&D is even more restrictive, requiring 15-year amortization.
While the R&D tax credit remained available, it often didn’t fully offset the burden created by delayed deductions—especially for small or early-stage companies.
The BBB brings relief on multiple fronts, especially for companies engaged in U.S.-based research and development.
For tax years beginning after December 31, 2024, businesses now have a choice:
This added flexibility allows companies to manage taxable income more strategically. It also helps restore some of the pre-2022 simplicity that was lost when full expensing was eliminated.
Note: The treatment of foreign R&D remains unchanged—still amortized over 15 years.
The bill also allows a special refund opportunity for “Small Business Taxpayers,” defined as those with average annual gross receipts of $31 million or less.
These companies can:
This retroactive fix could result in immediate cash refunds for eligible businesses—and help recover value that would otherwise be spread over multiple years.
For businesses above the $31M threshold, there’s no retroactive refund path—but there is a faster deduction schedule. They’ll now be able to deduct remaining unamortized 2022–2024 R&D expenses over one or two years, beginning in 2025.
The updates in the Big Beautiful Bill unlock real savings for a wide range of businesses—from solo consultants to high-growth startups to established R&D teams. Here's how it can play out in practice:
Let’s say your company invested $2.5 million in R&D in 2024.
Under the old amortization rule, you could only deduct a fraction of that in the first year. But with BBB changes, you now have the option to fully expense eligible R&D:
Deduction opportunity:
And that’s just for one year. If you had similar expenses in 2022-2023, you may be able to file amended returns and potentially recapture significant value.
Plus the R&D credit:
Total opportunity: ~$697,500 or more per year, depending on historical spend.
Startups often think R&D benefits only apply once they’re profitable. But that’s not the case.
If your company:
You may qualify to apply your R&D credit against payroll taxes—up to $500,000 per year.
This means:
Even if you’ve never claimed the R&D credit, it’s not too late to start.
If you’re a startup or small business, this bill presents both immediate and future opportunities. You can recover past costs, reduce your current tax liability, and continue to leverage credits going forward.
Larger companies may not see direct refunds, but they’ll benefit from faster deductions, creating stronger tax positioning over the next few years.
Whether you’re building new technology, improving internal systems, or solving technical problems for clients, it’s time to re-evaluate your R&D strategy.
To take advantage of the BBB’s updates:
The Big Beautiful Bill gives R&D-heavy businesses more flexibility, more clarity, and more cash flow potential. With immediate expensing back on the table and refund options for small businesses, this is one of the most business-friendly updates in recent tax history.
If your company is innovating, don’t leave these savings on the table. Now’s the time to act. Get started here.
Matt Bechtold heads up TaxTaker's R&D credit practice. He has helped companies claim valuable Federal & State R&D credits for more than 10 years for a wide range of clients and industries, ranging from Fortune 500 companies to startups and medium-sized businesses.