Completely agree. I am a bootstrapped SaaS owner and we cleared about $1M in revenue, $1,200 in profit, and $90k in taxes.

Bootstrapping a tech company in a post Section 174 world doesn’t even seem feasible. I can’t believe this issue isn’t being taken more seriously.

Given you’ll eventually get that full software deduction tax break back, just spread across several years, I am surprised there aren’t companies that will finance that to have the money upfront (with a fee of course :( )

But most startups get broke in several years, and codebases can't be repurposed as easily as, say, a fries-making machine, so the fee need to be very high to compensate the risk.

No one cares because most software developers are employed at big companies that can amortize. Even YC will probably just increase its seed instead of complain and consider it a "cost of business". This affects only marginal people. I am interested to talk with you about this if you want (feel free to reach, my email is in my profile).

> Even YC will probably just increase its seed instead of complain

Does it even impact these type of companies? 90% of the time at this stage you'll have very little income compared to expenses.

Was that profit after taxes? Or did it cost you $88k to run the business? Did you get to pay yourself?

>Or did it cost you $88k to run the business?

Why do you speculate that number? With $1M in revenue and $1.2k in profit, there must have been $998.8k in expenses. I assume "pay yourself" was part of the $998.8k. But I don't know the answer to the other part of your question: I don't know if the $90k in taxes are included in the $998.8k expenses.

Couldn't agree more. In the SMEs that I've been involved with, this has had a huge chilling effect on both hiring and innovation. I think that the change is a primary contributing factor to the layoffs and offshoring that have seized the market ever since.

I'm not convinced that this wasn't the intent of the change in the first place.

How does this boost offshoring when offshore employees are penalized the most?

The fix for that is to establish a subsidiary.

It's kinda nuts how little this is taken seriously on HN.

When combined with:

- Pressure to make use of office spaces again, away from remote work

- The AI bubble

- The layoffs that started before section 174 that demonstrated how headcounts had inflated

- The collapse of Silicon Valley Bank last year

... it is not looking good for software engineers in the US.

To be fair; the pressure to use office space again helps US workers. A lot of us don’t like it, but it’s a fair bit better than someone in Guatemala getting your job.

(Better for the US engineers, not for the Guatemalan, who is probably a competent engineer himself. But the topic is the outlook for US engineers).

Could someone elaborate this for an uninformed like me? Does it mean if you (a company) pay $1M as salary this year, only $0.2M can be treated as cost?

Essentially. An extremely oversimplified scenario: On paper if you made $1M in revenue, and had $1M in salary expenses that were all R&D, you would deduct $200k of that salary and be left with $800,000 in "profit" that you have to pay taxes on.

Except you don't have $800k. You have $0k.

Yikes. I kept wondering why R&D has been dead for so long. I have made comments here on HN about how R&D is responsible for so many tech advancements we still use, especially at Bell Labs.

This is a recent change, thanks to the 2018 tax code changes (the implementation was delayed until this tax year).

Why would that be counted as profit at all, if it was spent?

The house passed a bill, but the senate is working on their own version. I havent looked too deeply at either proposal, I just hope it doesnt make it even worse. I am waiting till the final proposal gets voted on.