What are Domestic research or experimental expenditures?

Domestic research or experimental expenditures are costs paid or incurred by businesses for research and experimentation conducted in the United States, Puerto Rico, or U.S. possessions, excluding foreign research activities. Under the One Big Beautiful Bill Act's Section 174A, these expenses qualify for immediate deduction in tax years beginning after December 31, 2024, reversing previous five-year amortization requirements. Qualifying expenses include wages, supplies, equipment rental, and contract research for developing new products, processes, formulas, inventions, or software when conducted domestically. The AI-driven R&D tax credits align with these deductions, providing comprehensive tax benefits for American innovation while maintaining the less favorable 15-year amortization for foreign research under Section 174.

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What is a Section 174 election?

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