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Eligible small businesses have until July 6, 2026 to file amended returns to retroactively deduct certain domestic research and experimental expenditures that were previously capitalized under Section 174 for tax years beginning after December 31, 2021. This deadline matters because many taxpayers may be able to accelerate deductions, generate refunds, and revisit prior-year R&D tax credit positions before the election window closes.
KBKG Insight
The July 6 deadline should be treated as a near-term refund review opportunity for small businesses with domestic research costs from 2022 through 2024. Eligible taxpayers may be able to amend affected returns and deduct costs that were previously capitalized and amortized under Section 174. CPAs should move quickly to identify clients with software development, engineering, product development, process improvement, or other research activities because the election requires amended returns for each affected year and may also impact the way the taxpayer coordinated Section 174 deductions with the research tax credit. The biggest planning issue is timing: clients that wait much longer may not have enough time to quantify costs, update tax returns, and coordinate related R&D credit and Section 280C positions before the deadline.
Key Takeaways
- Eligible small businesses should review 2022, 2023, and 2024 domestic research and experimental costs before the July 6, 2026 deadline, especially if those costs were previously capitalized under Section 174. The transition rule requires an amended return for each affected year.
- The opportunity is broader than a Section 174 deduction review. Businesses that claimed, missed, or reduced an R&D tax credit should revisit qualified research expenses, Section 280C elections, and related amended return positions before the one-year election period closes.
- CPAs should prioritize clients with software development, engineering, product development, process improvement, prototype testing, or technical design work because domestic software development costs are treated as research or experimental expenditures under Section 174A.
Background
The One Big Beautiful Bill Act added new Section 174A, which generally allows taxpayers to currently deduct domestic research and experimental expenditures paid or incurred in taxable years beginning after December 31, 2024. Domestic research and experimental expenditures are defined as research and experimental costs connected with the taxpayer’s trade or business, excluding foreign research, and software development costs which are treated as research or experimental expenditures.
The law also includes a transition rule for certain small businesses. Eligible taxpayers may elect to apply the new domestic R&E expensing rule retroactively by substituting “December 31, 2021” for “December 31, 2024.” The statute requires the election to be made no later than one year after enactment and requires an amended return for each taxable year affected by the election. Because the law was enacted on July 4, 2025, and that one-year date falls on Saturday, July 4, 2026, the deadline moves to Monday, July 6, 2026 under the federal weekend and holiday filing rule.
For this purpose, an eligible taxpayer generally means a taxpayer that is not a tax shelter and meets the Section 448(c) gross receipts test for the first taxable year beginning after December 31, 2024. For many calendar-year taxpayers, this generally means average annual gross receipts for the 2022 through 2024 period do not exceed $31 million.
Businesses that claimed the research tax credit should also review the related Section 280C election rules, because the law provides timing relief for certain amended return elections or revocations during the same one-year period. Because Section 280C elections typically must be made on an original, timely filed return, this is a rare opportunity to revisit the election on an amended return.
Businesses that have not claimed the research tax credit should consider claiming it at this time and take advantage of the additional benefit and 280C flexibility. To evaluate whether you or your clients may benefit from amending returns before the July 6 deadline, contact KBKG or request a consultation.
Conclusion
The July 6, 2026 deadline creates a limited opportunity for eligible small businesses to recover tax benefits tied to domestic research or experimental expenditures capitalized under prior Section 174 rules. CPAs should review affected clients now, especially those with significant 2022, 2023, or 2024 R&D costs, software development costs, prior R&D credit studies or clients that opted not to perform a R&D credit study due to the law at the time.
Action Steps
To evaluate whether your clients may benefit from amending returns before the July 6 deadline, contact KBKG or visit KBKG’s R&D Tax Credit Services to request a consultation.
For original returns, CPAs and businesses can use Dash.tax to streamline R&D tax credit studies and organize research expenditure documentation. Taxpayers evaluating the July 6 amended return opportunity should work directly with KBKG to assess eligibility, quantify previously capitalized Section 174 costs, and coordinate any related R&D credit considerations.
Source Documents
- Read full text of Public Law 119-21.
- Review IRS Form 6765 guidance.
- Review Section 7503 weekend and holiday timing rule.
See if You Qualify Today
Frequently Asked Questions
What qualifies for the R&D tax credit?
Qualified activities generally involve developing or improving products, processes, formulas, techniques, inventions, or software through a technical process of experimentation. Common qualified research expenses may include wages, supplies, and contract research costs tied to qualifying activities.
How do I claim R&D tax credits?
Businesses generally claim the research tax credit by filing Form 6765 with the federal tax return. In this amended return context, eligible small businesses should also review whether Section 280C elections or revocations should be coordinated with the retroactive Section 174A election.
How do I claim R&D tax credits?
Savings depend on qualified research expenses, the calculation method, tax posture, and available federal and state credits. KBKG notes that taxpayers may receive up to 12 to 16 cents of federal and state R&D tax credits for every qualified dollar, making a documented R&D credit study important for estimating the benefit.