MasterYoda900 has it backwards. However, my CPA said software engineer salaries are only categorized as R&D before the product is launched. So this only affects new startups pre-launch... if my CPA is correct.

Your CPA might be referring to rules for R&D tax credits, which covers a much, much more narrow scope of business activities. R&D credits cannot offset the impact of the amortization rules.

> However, my CPA said software engineer salaries are only categorized as R&D before the product is launched

I wonder how this one will pan out.

Let's say you build out a landing page with a way for folks to input their email address which demonstrates interest in your product. You've released it and people can sign up.

Did it launch? You could make case it did and now you're iterating on the product from here on out. You've launched phase 1 of the product which is probing for demand.

If you are a one man startup it doesn’t apply. This would only matter for employee salary.

Your CPA is not correct.

Any software development costs related to improving the product by providing new features must be amortized. Only clear bug fixes can have costs that are expensable.

This is made extremely clear in the IRS guidance document.

Your CPA is incorrect. The law now applies to ALL software development and related activites, regardless of what state the product is in.

There will be lots of confusion and litigation on this exact issue.

They have it backwards in two ways. Software isn’t Research, but Software Developers are generally doing Development ie improving existing products or developing new ones.

Yes, my (lay) understanding is that MasterYoda has it backwards and your explanation is correct.