Tax Return Changes for Startups and R&D Companies | HelloBooks Domestic research is deductible again, past capitalized costs can be written off, and contractor 1099s start at $2,000. What startup clients need.
For startups that build software or products, the return of domestic research expensing is the biggest change in years. Foreign development work is still treated the old way.
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Domestic research costs
Deductible in the year paid
Applies: Tax years beginning after 2024From IRS.gov · checked October 10, 2026
US research and experimental costs are deductible in the year paid for tax years beginning after 2024, while research done abroad still amortizes over 15 years. Domestic costs capitalized in 2022 to 2024 can be deducted in full in the first 2025 tax year or spread over two years.
Startups that pay offshore developers need a clean split between domestic and foreign work. Contractor payments made in 2026 need a 1099-NEC only from $2,000.
Record development payroll and contractor costs in accounts that separate domestic and foreign work, and keep the contractor’s country on the vendor record. HelloBooks collects W-9 details for US contractors and tracks them against the 1099 threshold during the year.
The plain-English summary for business owners
Business returns · research costs
Information returns · payments from 2026
Business returns · Form 8995
General information for tax professionals, not advice on a specific return. Figures are from IRS.gov on the date shown; check the current IRS instructions before filing.
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