What are Qualified research expenses?

Qualified research expenses are business costs that meet IRS requirements for immediate tax deduction under Section 174, including employee wages directly performing research activities, supplies consumed in the research process, contract research payments to third parties, and computer rental costs used exclusively for qualified research. The One Big Beautiful Bill Act restored immediate expensing for domestic qualified research expenses, effective the year after December 31, 2024, allowing businesses. This allows deduction of 100% of these costs in the year incurred, rather than amortizing them over five years. Research must be technological in nature, undertaken to discover information eliminating uncertainty, and satisfy the business component test, technical uncertainty test, process of experimentation test, and qualified purpose test to qualify for immediate deduction treatment. AI-driven R&D tax credits coordinate with qualified research expense deductions to maximize total tax benefits from innovation investments.

Related Terms

What is R&D expensing?

What is Depreciation?

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