The Retroactive R&D Refund Window Just Closed — But the Bigger OBBBA Win Is Still on the Table
The July 6 deadline to amend for retroactive R&D refunds has passed. Here's what small businesses can still claim as expensing goes permanent.
A key deadline for small businesses to reclaim taxes paid on research spending quietly passed last week. Under the One Big Beautiful Bill Act, qualifying small businesses had until July 6, 2026 to amend prior returns and recover money lost to the old rule that forced them to write off domestic research costs slowly. If your business missed it, that specific refund door has closed. But the far bigger prize — permanent, immediate expensing of domestic R&D going forward — is very much still open, and a lot of owners don’t realize they now qualify.
For years, a change buried in the 2017 tax law (Section 174) required businesses to capitalize and amortize domestic research and experimental costs over five years, rather than deduct them in the year spent. That quietly raised tax bills for any company doing product development, software work, or engineering — even small ones.
OBBBA reversed it. The law created Section 174A, letting taxpayers fully deduct domestic R&E costs in the year paid or incurred (or elect to amortize over at least 60 months), effective for tax years beginning after December 31, 2024, according to BDO. Foreign research still must be amortized over 15 years.
The IRS laid out the mechanics in Revenue Procedure 2025-28. It also gave smaller companies a retroactive break: businesses with average annual gross receipts of $31 million or less (tested under Section 448(c) for the 2025 tax year) could go back and apply the new expensing to tax years beginning after December 31, 2021 through 2024 — via amended returns. That retroactive election generally had to be filed by July 6, 2026 (one year after OBBBA’s enactment) or the statute of limitations, whichever came first. A limited six-month extension applied to certain 2024 returns filed before September 15, 2025.
Why it matters
The retroactive piece was a genuine cash-refund opportunity — real dollars back for businesses that had been capitalizing research costs since 2022. That window is now largely shut for most filers.
But the headline change is permanent and forward-looking: for 2025 and every year after, a qualifying business can deduct its domestic research spending immediately instead of dragging it out over five years. That’s a timing win that improves cash flow exactly when a growing company is investing in new products or software — and it’s not a one-time event you can miss.
What this means for your business
Even with the July 6 refund deadline behind us, there’s plenty to act on:
Don’t assume “R&D” means lab coats. For tax purposes, qualifying research routinely includes custom software development, product design, and process engineering — work plenty of ordinary small businesses do without ever labeling it “research.”
Make sure your 2025 return captures full expensing. This is the first year the permanent rule applies. If your books aren’t already tagging research and development costs, fix that now so nothing gets buried in general expenses.
Coordinate the R&D tax credit carefully. Rev. Proc. 2025-28 ties into Section 280C(c) rules that require reducing your deduction by the research credit — or electing a reduced credit. This is where a bookkeeper and tax preparer need to be on the same page.
If you filed a 2024 return without extension, ask about the six-month window. A narrow group of filers may still have time. Confirm your specific dates with a professional rather than assuming the door is fully closed.
OBBBA’s Section 174A lets qualifying businesses “fully deduct domestic research costs in the year paid or incurred,” effective for tax years beginning after December 31, 2024. — BDO
This is general information, not tax advice — the retroactive election and credit-coordination rules are technical, and your eligibility and deadlines depend on your specific filing history.
The bottom line
The retroactive R&D refund was a use-it-or-lose-it opportunity, and for most businesses that deadline has passed. But the permanent shift back to immediate expensing is the change that keeps paying off — quietly lowering the tax cost of building and improving what you sell. Make sure your 2025 books and return actually capture it.
