What is Section 174 ?
Major changes in TCJA – Tax year 2022 (Tax Cut and Jobs Act)
The Tax Cut and Jobs Act states that, beginning in Tax Year 2022, Section 174 expenses must be amortized over 5 years (domestic) or 15 years (foreign). Software development costs were given special mention. Software development expenses incurred in tax years starting after December 31, 2021, are no longer deductible under Rev. Proc. 2000-50.
On December 29, 2022, the IRS released Rev. Proc. 2023-11, which states that, in lieu of filing a 3115, taxpayers may include a notice with their original 2022 tax return indicating that the taxpayer is now amortizing the Section 174 Expenses.
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