How to claim retroactive R&D expensing for 2022-2024

Small businesses can claim retroactive R&D expensing for 2022-2024 under the One Big Beautiful Bill Act (OBBBA) if they meet eligibility criteria, primarily through amended returns or catch-up elections on the 2025 tax return. This reverses the prior five-year amortization requirement for domestic R&D costs under Section 174 of the TCJA. Only U.S.-based qualifying expenses (wages, supplies, contract research) count, and businesses must pass the gross receipts test (average under $31 million for prior three years).

Eligibility Check

Confirm your business qualifies as "small" per IRC §448(c) with gross receipts ≤$31M (2025 inflation-adjusted threshold).

Expenses must be domestic R&E; foreign ones remain amortized over 15 years.

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Partnerships/S-corps: Deductions flow through, so consider partners' tax brackets for refund potential.

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Claiming Options

Amend prior returns (2022-2024): File Form 1040X (individuals), 1120X (corps), or 1065X (partnerships) to retroactively expense full amounts, potentially generating refunds. Attach a statement electing Section 174A retroactivity; deadline generally July 2026 or original due date + extensions.

Catch-up on 2025 return (no amendment): Elect to deduct remaining unamortized balances all in 2025 or spread over 2025-2026 (50/50). Use automatic accounting method change (Form 3115) for prior years' true-up.

For 2024 filers: If not yet filed, deduct fully on original return with §174A election statement, assuming eligibility.

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Steps to File

Gather documentation: Time-stamped records of R&D activities, costs, and U.S. nexus to substantiate claims and avoid audits.

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Calculate unamortized balances (e.g., 2022 expenses: 20% already deducted by 2024, rest eligible).

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Attach election statement: "Electing retroactive full expensing under §174A for tax years 2022-2024 per OBBBA."

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E-file or mail amendments; expect 16+ weeks for processing. Consult a CPA for state conformity and CAMT adjustments.

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Key Risks

Weak documentation risks denial/penalties; track everything contemporaneously.

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States may not conform, creating dual tracking.

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Roth catch-up rules or phase-outs could limit owner benefits if income >$150K.[ from prior]