R&D tax credit: How One Big Beautiful Bill Act updates could benefit your business

By Eric Hermanson, CPA

Since the One Big Beautiful Bill Act (OBBB) was signed into law on July 4, 2025, much has been said about its business-friendly legislative updates. One update that is especially beneficial for businesses in the manufacturing, professional services, and technology sectors has to do with the research and development (R&D) tax credit.

Since December 31, 2021, businesses have had to capitalize and amortize domestic R&D costs over 5 years (foreign R&D costs must be amortized over 15 years). The OBBB now allows for the immediate expensing of domestic R&D costs starting in 2025 for all tax years that begin after December 31, 2024.

The OBBB allows all businesses that have previously claimed the R&D tax credit in years 2022–2024 to either continue this amortization over 60 months or deduct any remaining capitalized costs over the next year or two. Additionally, the OBBB allows small business taxpayers (defined as annual gross receipts of less than $31 million) to amend their previous returns (tax years 2022–2024) to deduct any remaining capitalized R&D costs.

Here’s what this could mean for your business.

To amend or to expense, that is the question.

If your business fits the definition of a small business taxpayer, you have a couple of advantageous options to consider: amend your tax returns to retroactively expense remaining capitalized R&D costs from 2022–2024 or expense these costs over the next year or two. Determining which option is best for your business will depend on your situation.

Some things to consider:

• If you choose to go back and amend your previous years’ tax returns, you must do so by July 4, 2026. Although this may seem like a long way off, this deadline gives you a relatively short window to act. To allow for the time needed to amend your returns, we recommend reaching out to your tax advisor as soon as possible.
• If you don’t want to go back and amend returns (or aren’t a small business taxpayer), you can elect to deduct R&D expenses over the next year or two starting in 2025. This means you could deduct the remaining capitalized R&D costs in 2025 or spread them out over 2025 and 2026. To help you maximize the benefits of this option, we can run scenarios for either option based off your 2025 income.
• Keep in mind that foreign R&D costs still must be amortized over 15 years and you can still elect to amortize domestic R&D costs over 60 months.

Is your business making the most of the R&D tax credit?

An R&D tax credit study can determine if you qualify for the credit. It also can help you make the most of the credit’s benefits by quantifying your R&D activities.

Whether you’re unsure if you qualify or looking to maximize your credit benefits, our in-house R&D tax credit advisor, Ryan Miller, can review your business activities during a free consultation and conduct a study, if appropriate.

Properly documenting your R&D activities for the R&D tax credit is important; this aspect of the qualification process can be time-consuming and complicated to navigate. To help you meet documentation requirements, Ryan can develop and implement a plan for securing documents and complete the tax forms required to claim the credit.

Get started now.

As I mentioned, you only have until July 4, 2026, to take advantage of the amending benefits related to the OBBB R&D tax credit updates. It’s important to reach out to your tax advisor as soon as possible to start exploring your options.

If your business and its R&D expenditures are based in Minnesota, you could also be eligible for Minnesota’s R&D tax credit—in addition to the federal tax credit.

We’re here to guide you through your R&D tax credit options and help you make the most of its benefits. Contact us today to get started!