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Section 174 Deduction — A Relief with R&E Expenses

EEPB InnovaTax provides Section 174 Deduction studies for clients as one tool in the toolbox of tax planning and mitigation. Section 174 creates a deduction for companies engaged in research and experimentation (R&E). Specifically, it allows a taxpayer to deduct all expenses related to overcoming uncertainty regarding the improvement or development of a product or process. The Deduction can also affect permanent tax recategorization for some taxpayers.

Section 174 allows for the deduction of R&E costs either immediately, where cash is important, or later, where a taxpayer might want to delay deductions into future years, as the Deduction can be taken over five years. This tax tool can be especially helpful for startups looking to maximize tax savings when selling to another company.

Our Approach to the Section 174 Deduction

The InnovaTax team uses a data-first approach to streamline study timelines and to lower the amount of time needed from clients. We start by getting to know our clients’ financials. Then, once the analysis has begun, we ask for time with employees. This ensures that no time is wasted on issues that do not help the bottom line.