‘One Big Beautiful Bill’ Creates R&D Expensing Opportunities for Small and Mid-Sized Businesses

New federal tax law, informally known as “One Big Beautiful Bill,” includes major updates to the tax treatment of research and development (R&D) expenditures. It’s a potential catalyst for small to mid-sized businesses. With retroactive and prospective relief provisions, this legislation creates opportunities for strategic tax planning and cash flow beginning immediately.

Below, we break down what’s changing, who qualifies, and where your business might benefit.

Permanent expensing of domestic R&D

Beginning with tax years after December 31, 2024, businesses will be able to fully deduct domestic R&D expenditures in the year incurred. This reverses the 2017 Tax Cuts and Jobs Act rule that required businesses to amortize domestic R&D costs over five years.

Accelerated amortization for unamortized domestic R&D expenditures
The new law allows all businesses to:

• Deduct any remaining unamortized domestic R&D expenses all at once in 2025, or
• Spread those deductions over two years (2025–2026).

Retroactive relief for small businesses

The legislation goes even further for businesses that qualify under the “small business gross receipts test”. This includes companies with $31 million or less in average gross receipts for the taxable years prior to the taxable year beginning after December 31, 2024 (generally 2025).

In lieu of deducting the unamortized domestic R&D expenditures in 2025 or 2026, qualifying small businesses can retroactively deduct R&D expenses by amending their tax returns for 2022, 2023, and 2024 tax years, restoring a more favorable tax treatment for three open tax years. Qualifying small businesses only have one year from the date of the law's enactment to file the amended returns to take advantage of this relief.

Strategic opportunities for business owners

The revised rules present a rare window of opportunity to reassess tax strategy, especially for companies investing heavily in innovation. Regardless of the company's size, proper planning is required to ensure the company is capturing the maximum amount of tax benefit. The planning should include not only analyzing the tax consequences of the various options to deduct their domestic R&D expenditures but also an overall evaluation of the company’s R&D expenditures to ensure the company is maximizing its R&D credit opportunities.

For more information regarding deducting R&D expenses, please fill out the form on this page to speak with our R&D Practice.