If your business spent money developing products, software, or processes between 2022 and 2024, there may be a refund waiting for you — and for some taxpayers, the window to claim it could close as early as July 6, 2026. Here’s what changed, who qualifies, and why moving quickly matters.
The Section 174 Trap That Started It All
For decades, businesses could fully deduct their research and experimentation (R&E) costs in the year they spent the money. That changed with the Tax Cuts and Jobs Act (TCJA). Beginning in 2022, the law forced companies to capitalize their R&E expenses and deduct them slowly over five years (15 years for foreign research) instead of all at once.
The practical effect was painful. A company that spent heavily on engineers, developers, or product testing suddenly couldn’t deduct most of that spending right away. Many profitable-on-paper businesses ended up with tax bills far larger than their actual cash flow could comfortably support — simply because a real, current expense was being stretched across five years.
How the One Big Beautiful Bill Act Reopened the Door
The One Big Beautiful Bill Act (OBBBA) reversed course on domestic R&E. Instead of forcing a five-year amortization schedule, the law restores the ability to deduct qualifying domestic research costs much sooner — and, critically, it gives businesses a pathway to recover the deductions they lost during the 2022–2024 capitalization years.
For many small and mid-sized businesses, that pathway can translate into a refund. In some cases, the amount in play rivals a full year of profit, because it represents deductions that were delayed rather than allowed.
Who Qualifies?
R&E is broader than lab coats and patents. Spending that often qualifies includes:
- Software and application development
- Designing or improving products and prototypes
- Developing or refining manufacturing processes and techniques
- Engineering and technical design work
- Wages, supplies, and contract research tied to the above activities
If your business invested in building or meaningfully improving something during 2022, 2023, or 2024, it’s worth checking whether those costs were swept into the old amortization rules — and whether they can now be recovered.
Two Paths to the Money
There are generally two routes to capturing the benefit, and the right one depends on your situation:
- Amended returns. Going back and amending the affected years can unlock a direct refund of taxes overpaid because deductions were delayed.
- An accounting-method change. Rather than amending, some businesses can make a change on a current return that catches up the missed deductions in one place.
Each path has different deadlines, paperwork, and trade-offs. Choosing correctly is where a careful review pays off — the wrong election can leave money on the table or create complications down the road.
Why July 6, 2026 Matters
The IRS has laid out the procedures for claiming this relief, and some of those procedures come with firm deadlines. One of the earliest is July 6, 2026. Depending on your filing history and the route you take, missing it could mean forfeiting a portion of what you’re owed — or losing the simpler path and being left with a more complex one.
Because the deadline is close and the analysis takes time, this is not a “wait until the next filing season” item. If there’s a chance your 2022–2024 R&E spending was caught in the old rules, the time to look is now.
The Documentation the IRS Expects
A strong claim is a well-documented claim. Be ready to show:
- What was developed or improved, and why it qualified as R&E
- How the costs were calculated — wages, supplies, and contractor amounts
- How activities tie to the technical work, not general business operations
Clean documentation does two things: it maximizes the deduction you can support, and it protects you if the IRS ever asks questions.
Your Next Step
The R&E rules have whipsawed business owners over the past few years, and the recovery opportunity is real — but it’s also time-sensitive and technical. The July 6, 2026 deadline makes early action the safe choice.
Let Manay CPA review your R&E position before the window closes. We’ll determine whether your 2022–2024 spending qualifies, identify the best path to a refund, and handle the filing. Book a free R&E refund assessment →
This article is for general informational purposes only and does not constitute tax or legal advice. R&E rules and deadlines depend on your specific facts. Please consult a qualified tax professional before acting.
