Re:The time bomb in the tax code that's fueling mass tech la...
by fauigerzigerk on Saturday June 07, 2025 @01:58PM
(#44211328)
If they hire 20 devs in their first year paying $5m in salaries, only $1m or $500k (if the mid-year convention applies) would count as a business expense in that first year.
If their revenue was $2m, that would leave them with $1m (or $1.5m) of taxable profits unless that was eaten by other costs.
It doesn't have to be a problem, but if revenue grows fast and they go on another hiring spree in the following year then it could become a problem.
That said, if revenue grows so fast, it seems likely that they would have huge marketing and sales costs that could be expensed immediately. So maybe this isn't really a problem for many startups. I'm not sure.
If their revenue was $2m, that would leave them with $1m (or $1.5m) of taxable profits unless that was eaten by other costs.
It doesn't have to be a problem, but if revenue grows fast and they go on another hiring spree in the following year then it could become a problem.
That said, if revenue grows so fast, it seems likely that they would have huge marketing and sales costs that could be expensed immediately. So maybe this isn't really a problem for many startups. I'm not sure.