The Tax Cuts and Jobs Act (TCJA) of 2017 brought about sweeping legislative changes for tax payers, particularly impacting how companies can claim research and development (R&D) expenses. For businesses relying on the R&D tax credit, understanding the implications of these changes is paramount for financial stability and growth.
Prior to the TCJA, businesses could deduct qualified research or experimental expenditures within the same taxable year. However, the TCJA altered this landscape. Instead of immediate deductions, businesses are now required to amortize R&D expenses over a span of 60 months. This shift in approach essentially redefines these expenses as part of R&D Expense Capitalization, marking them as an investment rather than an immediate expense.
New R&D Tax Credit Legislation Can Impact A Company’s Bottom Line
This R&D tax credit change has significant implications. The biggest consideration for businesses on this side of the TCJA — the current legislature can cause a notable increase in taxable income, potentially impacting a company's bottom line. Business owners now find themselves faced with the challenge of navigating these alterations in tax law to minimize the impact on their operations and profitability.
Of course, the implications of the TCJA's R&D expense capitalization provisions extend beyond immediate financial considerations. They necessitate a shift in the way businesses approach R&D expenditures, transforming how these costs are accounted for and planned within the broader financial framework.
R&D Tax Professionals Can Help Businesses Optimize Results With The TCJA
Like most tax programs, the R&D tax credit has undergone several iterations since its inception, making it difficult for business owners to keep pace with any changes. However, understanding the intricacies of R&D expense capitalization under the TCJA is crucial for companies to make informed financial decisions. As these changes can often affect profit margins and tax liabilities, seeking guidance from R&D tax professionals becomes imperative.
Connecting with a skilled professional R&D tax firm, like Acena Consulting, can provide invaluable insights into managing these alterations effectively. Acena’s team of R&D tax credit experts possess the insight and expertise needed to navigate the complex terrain of R&D tax credits. We develop a comprehensive strategy to help financial professionals and business owners mitigate the impact of R&D expense capitalization on their operations.
Contact Acena Consulting Today
The TCJA's modifications to R&D expense capitalization demand a proactive and informed approach from businesses. Acena Consulting’s accounting team can help you understand the nuances of these changes. We’ll develop a plan to navigate the shifting landscape ensuring optimized results amid evolving legislation and regulatory environments.
Schedule an appointment today to get started.
