Extended partnership and S corporation returns are due September 15. Extended C corporation and individual returns follow on October 15. For any business that spends money on product or process development, the 2025 return has a Section 174A decision on it, and that decision is a good reason to revisit the R&D credit at the same time.
The short history
From 2022 through 2024, the tax code forced businesses to capitalize research costs and amortize them over five years (fifteen for foreign research). That rule turned a lot of profitable-on-paper companies into tax bills they did not expect, because they could not deduct the engineers they had paid.
The One Big Beautiful Bill Act fixed the domestic side. New Section 174A restores immediate expensing of domestic research and experimental costs for tax years beginning after December 31, 2024. It is permanent. Foreign research costs are still amortized over fifteen years.
The retroactive window closed. The transition decision did not.
Small businesses with average gross receipts of $31 million or less had a one-time option to amend their 2022 through 2024 returns and apply Section 174A retroactively. That window closed on July 6, 2026. If you filed, good. If you did not, the amended-return path is gone, and it is not worth chasing.
What remains is the transition rule for everyone. If you still have unamortized domestic research costs from 2022 through 2024 sitting on your books, you can choose to deduct the full remaining balance in your first tax year beginning after December 31, 2024, or spread it ratably over that year and the next. For calendar-year filers, that is a 2025 decision, and it goes on the return you are about to file.
Which option is better depends on your 2025 income, your expected 2026 income, state conformity, and how the deduction interacts with the business interest limitation. This is exactly the kind of question worth an hour with your CPA before the return goes out.
Why the credit deserves a second look right now
Section 174A is a deduction question. The R&D credit under Section 41 is a separate benefit, and it is more valuable now for two reasons.
First, the deduction and the credit no longer fight each other the way they did during the amortization years. The Section 280C election, which lets you take a reduced credit rather than reduce your deduction, is simpler to model when the underlying costs are fully deductible.
Second, the same work that supports a Section 174A deduction is often the work that supports a credit claim. If you have already identified your research costs for the deduction, you have done most of the work to quantify qualified research expenses for the credit. Companies that stop at the deduction leave the credit on the table.
Who this affects most
Software companies with U.S.-based engineering teams. Manufacturers doing process and product development. Engineering and design firms. E-commerce brands that pay developers. Any business that hired technical people to solve technical problems.
If your business had unamortized research balances, the catch-up deduction may be significant. If you have never claimed the credit, the open years are still open: amended returns can generally reach back three years for the credit itself, separate from the Section 174A election that expired.
What to check before September 15 or October 15
Confirm whether you have unamortized 2022 through 2024 research costs and how much.
Decide between the one-year catch-up and the two-year spread. Model both.
Confirm you are treating domestic and foreign research separately. Foreign is still fifteen-year amortization.
Check state conformity. California, for example, does not follow Section 174A.
Ask whether the R&D credit has been claimed for 2025, and for the open prior years. If not, ask why not.
If you are a qualified small business with little or no income tax, ask about the payroll tax offset. The credit can be applied against employer payroll taxes for eligible startups.