The IRS has issued guidance on how taxpayers can deduct domestic research expenses as a result of changes made by OBBBA. (Rev. Proc. 2025-28) The guidance addresses how small businesses can currently deduct these expenses retroactive to the 2022 tax year, as well as the accounting method changes required for all taxpayers as a result of the OBBBA changes (which also allow taxpayers to amortize such expenses over a period of at least 60 months rather than deducting them in the year incurred).
Revenue Procedure 2025-28 describes two methods for eligible small taxpayers to make the election:
- Attach an election statement to their amended 2022, 2023, or 2024 income tax returns (AARs for partnerships); or
- For taxpayers who haven’t yet filed their 2024 income tax returns (such as calendar-year taxpayers currently on extension), if they deduct their 2024 research expenses on their timely filed returns, then they are deemed to have made the election, even without attaching an election statement to their return. For this deemed election, returns must be filed by November 15, 2025.
Caution: Eligible small taxpayers who make the election to deduct their research expenses on their 2024 income tax returns, who also had research expenses in 2022 and 2023, must also file amended 2022 and 2023 income tax returns to deduct their research expenses from those years because the election applies to all retroactive tax years in which research expenses were paid or incurred.
For the 2022 taxable year, eligible calendar-year small taxpayers are subject to the standard three-year statute of limitations period to file a refund claim. For the 2023 taxable year, taxpayers only have until July 6, 2026, to amend their returns to apply this election.
Alternatively, all taxpayers, including small taxpayers, can elect to deduct their remaining unamortized research expenses from the 2022, 2023, and 2024 taxable years on either their 2025 income tax return or spread the deductions over their 2025 and 2026 taxable years. This election is made on the taxpayer’s 2025 income tax return.
Note that the IRS’s processing times for amended income tax returns is at least nine months, so amended prior-year returns may not provide refunds faster than applying the alternate election to deduct unamortized domestic research expenses on the taxpayer’s originally filed 2025 income tax return.
There are many more points of guidance available under Revenue Procedure 2025-28, which we will cover in future webinars and seminars, including our Federal and California Tax Update.
Sign up for Spidell’s 2025/2026 Federal and California Tax Update webinar and get more information on Revenue Procedure 2025-28 and OBBBA’s many tax provisions. Click here and register today.
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