Section 174 Deduction Calculator for Software R&D

Section 174 of the US tax code governs how R&D expenses are deducted. Under current rules, software development costs must be amortized over 5 years (domestic) or 15 years (foreign), rather than deducted immediately. This calculator helps you estimate your annual amortization deduction and compare it to the potential savings if immediate expensing is restored.

It computes the difference between the immediate deduction (if expensing is restored) and the current amortization deduction for the year, then multiplies that difference by your tax rate to estimate the tax savings.

This tool provides estimates based on the inputs you provide and simplified Section 174 rules. It is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional for your specific circumstances.

It refers to a hypothetical or proposed tax rule change that would allow businesses to deduct R&D expenses in the year they are incurred, rather than amortizing them over several years. This calculator lets you compare that scenario against current law.