U.S. research costs are deductible again.

1. Any taxpayer can deduct the domestic costs from 2022 through 2024 that are still unamortized, all in the first tax year beginning after December 31, 2024, or split evenly over that year and the next. It is handled on the 2025 return as an accounting method change. No amended return is needed.
2. Small businesses had a second option, and it has closed. A business with average annual gross receipts of $31 million or less could elect to apply Section 174A back to 2022 through 2024, usually by amended return, and in some cases make or revoke the Section 280C election for those years. The deadline was July 6, 2026.
3. Foreign research from those years stays on its fifteen-year schedule.

• Section 174 costsThe full cost of the research: wages, materials, a share of overhead and depreciation, patent costs, and every dollar of software development, which the statute treats as research.
• Credit costs under Section 41A narrower list: wages of the people doing, directly supervising, or directly supporting the work, supplies used up in it, 65 percent of U.S. contract research (more for some university and consortium work), and cloud computing used for the research. No overhead and no depreciation.
• How they relateEvery credit cost is a Section 174 cost. Most Section 174 costs are not credit costs. A study documents both, so the deduction and the credit come from the same records.

The credit adds the four-part test on top of Section 174. Being a Section 174 cost is only the first of the four parts.

Section 280C(c) stops the same dollars from producing both a full deduction and a full credit. The taxpayer picks one of two routes each year:

1. Full credit, smaller deduction. Reduce the Section 174A deduction by the amount of the credit.
2. Reduced credit, full deduction. Answer Yes to Item A on Form 6765. The credit drops to 79 percent of the computed amount on the simplified method, or a 15.8 percent rate on the regular method. The election is made only on an original return filed by the due date including extensions, and it cannot be changed for that year.

At a 21 percent corporate rate the two routes come out about the same; timing is the difference. For an S corporation or partnership, where the owners pay tax at their own rates, run both before filing. The Form 6765 guide covers Item A.

• Revenue Procedure 2025-28
• 26 U.S.C. § 174
• 26 U.S.C. § 280C
• Instructions for Form 6765 (Rev. December 2025)
• Instructions for Form 4562 (2025), Part VI

• Form 6765Completing Form 6765, the credit form itself.
• Form 3800Where the research credit goes on Form 3800 and how it reaches the return.
• Form 1120C corporations: Schedule J, where the Section 174A deduction goes, and Form 1120-X.
• The four-part testThe four questions that decide which projects count.