Is Your Business Developing New Products? It Could Qualify for Tax Breaks.

Many small and midsize business owners don’t know they are eligible for two big tax breaks, one of which was sweetened by last year’s One Big Beautiful Bill Act starting on 2025 taxes.

Businesses that spend resources developing new products, systems or processes—whether a biotech firm developing a vaccine or a bakery experimenting with the shelf life of cupcakes—can potentially claim either a federal research and development (R&D) tax deduction or credit, or both.

A change under last year’s Once Big Beautiful Bill Act is good reason for businesses to consider their eligibility. The bill, passed in July, restores the ability to fully deduct domestic R&D expenses beginning on 2025 taxes. Foreign-based expenses still must be expensed over 15 years.

Beginning in 2022 under the Tax Cuts and Jobs Act of 2017, businesses had to start amortizing R&D deductions for U.S.-based research over five years, reducing the affordability of doing research and killing the incentive to go to the trouble of tracking eligible expenses.

“As a result of the amortization requirement, a lot of people didn’t classify things as R&D expenses. They didn’t want to amortize,” says Damien Falato, a partner at UHY, who works with many pass-through entities, which tend to be small and midsize businesses.

There’s more good news under the new tax law: Businesses with average annual gross receipts of $31 million or less over the last three years can deduct unamortized expenses from 2022 through 2024 on their 2025 or 2026 taxes.

“This creates a huge opportunity for write-offs,” Falato says. “This is one of the biggest things on our plate right now that we’re doing for clients.”

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