If you’re building at the pre-seed or seed stage, the tax code can either be an anchor or a tailwind. Our job at ShayCPA is to make it the latter. Here’s a founder-friendly rundown of what’s still on the table in 2025, what’s changed in practice, and how to position your company to actually capture the benefit.
What’s new (and why it matters)
- R&D credit + payroll offset are still powerful. Even if you’re not profitable yet, you can use up to $500,000 of federal R&D credit each year to reduce employer-side payroll taxes. That’s real runway.
- Treatment of research costs matters more than ever. Domestic research and experimental (R&E) costs may be currently deductible, while foreign R&E is generally less favorable. If you build in multiple jurisdictions, the split can impact your overall tax liability. Starting with tax year 2025, Domestic R&D is deductible fully in the current year, while foreign R&D will need to be capitalized and spread out over a 15-year period.
- Equipment expensing remains a big lever. If you buy servers, lab instruments, or short-life assets, rules around bonus depreciation and Section 179 can put a large share of the cost into the current year.
- ERC is effectively closed to late filers. If you haven’t filed already, it’s time to focus on clean documentation for credits you can claim rather than chasing ERC.
Federal incentives you can still claim in 2025
1) The R&D Tax Credit (Section 41) with a $500k payroll offset
If you’re pre-revenue or breakeven, the R&D credit can still put cash back into your business via the payroll tax offset. You’ll:
- Calculate the credit on Form 6765,
- Elect the payroll offset,
- Flow it onto Form 8974 so it reduces payroll taxes starting the quarter after you file your income tax return. Depending on the HRIS payroll platform you use, the credit can be communicated by being entered directly into their platform or by coordinating with your account manager. These are tasks that your accountant can also help with.
Founder takeaway: If you’re shipping code, prototyping, or running experiments, this can materially extend runway, even before you’re profitable. The IRS has tightened the rules around R&D credit claims – see new rules around Form 6765. Businesses will now face higher documentation standards and closer IRS scrutiny. Companies relying on this valuable credit should act now to strengthen recordkeeping and prepare for tougher audits. The audit standard is rising – see new rules around Form 6765, so log the four-part test (permitted purpose, elimination of uncertainty, process of experimentation, and technological in nature) at the project level. Tie the qualifying tasks to wages, contractors, and supplies. Stronger documentation today means smoother filings — and less IRS scrutiny — tomorrow.
2) Current-year treatment for U.S. R&E (Section 174)
For many startups, domestic R&E is once again treated more favorably than foreign R&E. If you’ve got mixed teams (U.S. plus offshore), your tax position can swing based on where the work is performed. We model both scenarios so you can decide where to place teams and vendors.
Founder takeaway: Revisit your hiring and vendor mix for 2025. Pulling more R&E on-shore can increase deductions and reduce your taxable income.
3) Equipment expensing, Bonus depreciation, and Section 179
Compute-heavy or lab-intensive teams can still get substantial first-year write-offs for qualified property placed in service. Section 168(k) (bonus depreciation) and Section 179 often combine to expense much of your server racks, networking gear, or bench equipment.
Founder takeaway: If you’re scaling infra or opening a lab, we’ll time “placed-in-service” dates and pick the right mix (179 vs. bonus) for your facts.
4) QSBS (Section 1202) planning
Qualified Small Business Stock (QSBS) remains one of the most founder-friendly provisions in the code. Keep your corporation under the $50M gross-assets test at issuance, issue stock properly for cash/services, and stay in a qualifying trade or business. Hold periods and per-taxpayer caps drive the outcome at exit.
Founder takeaway: Entity choice and cap-table hygiene now are what make QSBS work later. Don’t leave it to cleanup at Series A.
What this means for your startup, by sector
SaaS (B2B/B2C software)
- R&D credit + domestic R&E treatment = a strong combo. Qualifying engineering work (new features, performance refactors, security hardening) can generate a federal credit, and favorable treatment of U.S. R&E boosts deductions. Foreign work typically receives less favorable treatment. Plan where your team sits.
- Cloud and compute can count (sometimes). When cloud spend is tied to bona fide experimentation (feature flags, A/Bs, staging/training environments), portions may support the R&D credit. Keep tickets, PR links, and run logs that show the experimental loop.
- Internal-use software has a higher bar. If you’re building internal tools (billing, admin consoles etc.), you may need to meet the high-threshold-of-innovation test on top of the normal four-part test. Document technical risk and measurable improvement.
- Buy vs. rent. Owned servers/network gear placed in service can qualify for significant first-year write-offs. Pure rentals remain OPEX. We’ll model both to see what lowers the total cost of computing.
BioTech (therapeutics, diagnostics, tools)
- R&D credit vs. Orphan Drug Credit (ODC). You generally can’t double-count the same dollars, so we model which path yields more value now vs. later based on your pipeline.
- Grants & CROs—watch “funded research.” NIH or strategic funding can reduce what’s eligible unless you retain substantial rights and are at risk. We scrub SOWs and MSAs for the right language before you file.
- Domestic lab work helps reduce taxable income. Running preclinical/clinical work in the U.S. can improve your deduction profile compared to foreign sites.
- QSBS upside. Many BioTech founders and early employees can benefit from QSBS with the right corporate setup and timing, worth aligning before your next round.
AI (models, agents, infrastructure)
- Prove the “process of experimentation”: For ML/AI, your credit turns on how you test alternatives (architectures, features, training data strategies, hyperparameters). Keep experiment logs, ablations, and acceptance criteria tied to the business component (the model or feature).
- Compute strategy = tax strategy: Buying GPUs/servers vs. renting in cloud has different tax outcomes. Owned hardware can unlock first-year expensing; cloud remains immediately deductible but may or may not support the R&D credit depending on how it’s used.
- Data costs aren’t automatically QREs: Labeling/curation qualifies when it’s integral to experimental cycles aimed at eliminating technical uncertainty, not just production prep. Be deliberate in your narratives and time tracking.
- Payroll-offset is tailor-made for pre-seed AI: If income tax is zero but payroll is large, the R&D-to-payroll offset turns credits into near-term cash relief.
Don’t sleep on state & local credits
- California R&D credit remains attractive, though larger businesses face annual usage caps in 2024–2026. Most early-stage teams won’t hit the ceiling, but we still plan carryforwards and timing.
- New York has multiple innovation incentives, including the Life Sciences R&D credit through Empire State Development.
- NYC Biotech credit is available for qualifying emerging tech companies, particularly interesting for therapeutics and diagnostics teams in the city.
What’s not really a play anymore
- Employee Retention Credit (ERC): The window for new claims has effectively closed, and the IRS is auditing aggressively. If you filed already, keep pristine records; if not, don’t bank on late ERC cash.
Your 2025 founder checklist
- Map your R&D early (Four-Part Test). Track projects, hypotheses, experimentation steps, and uncertainties as you go. Tie engineer/contractor time and supplies to specific business components so your Form 6765 is defensible.
- Elect the payroll offset on time. File your income tax return timely (or on extension) so the credit starts reducing payroll taxes the very next quarter. Coordinate finance + payroll.
- Choose your expensing path. We’ll decide whether to lean on bonus depreciation, Section 179, or both, and we’ll time placed-in-service dates to capture the benefit in 2025.
- QSBS hygiene. Confirm C-corp status, <$50M gross assets at issuance, proper board approvals, and clean documentation for founder/employee issuances.
- Layer state credits. If you’re in CA or NY (or plan to be), schedule the applications/certifications and budget the time—especially for NYC BioTech.
How we help
At ShayCPA, we work with venture-backed teams every day to turn engineering and lab work into real tax savings. In practice, that looks like:
- Standing up lightweight R&D tracking your team will actually use,
- Modeling R&E treatment + bonus/179 so you capture cash benefits this year,
- Building a clean, defensible Form 6765 package (and the payroll offset) that plays nicely with your payroll provider,
- Coordinating QSBS eligibility so today’s equity choices unlock tomorrow’s exits, and
- Navigating state credits (CA/NY/NYC) and certifications without derailing your roadmap.
If you want us to review your 2025 plan, or to estimate your R&D payroll offsets for the next four quarters, send us your latest org chart and a brief on your dev roadmap, and we’ll take it from there.
Get in touch with ShayCPA today and make sure your next year is planned, optimized, and investor-ready.
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