Research & Experimental Costs

You can amortize your research and experimental costs, deduct them as current business expenses, or write them off over a 10-year period. If you choose to amortize these costs, deduct them in equal amounts over 60 months or more. The amortization period begins the month you first receive an economic benefit from the expenditures. For a definition of "research and experimental costs" and information on deducting them as current business expenses, see chapter 8.

Optional write-off method. Rather than amortize these costs or deduct them as a current expense, you have the option of deducting (writing off) research and experimental costs ratably over a 10-year period beginning with the tax year in which you incurred the costs.

For more information on the optional write-off method, see Internal Revenue Code section 59(e).

Costs you can amortize. You can amortize costs chargeable to a capital account if you meet both the following requirements.

• You paid or incurred the costs in your trade or business.
• You are not deducting the costs currently.

How to make the choice. To choose to amortize research and experimental costs, enter your deduction in Part VI of Form 4562 and attach it to your income tax return. Generally, you must file the return by the due date (including extensions). However, if you timely filed your return for the year without making the choice, you can still make the choice by filing an amended return within 6 months of the due date of the return (excluding extensions). Attach Form 4562 to the amended return and write "Filed pursuant to section 301.9100-2" on Form 4562. File the amended return at the same address you filed the original return.

Your choice is binding for the year it is made and for all later years unless you get IRS approval to change to a different method.

More information. For more information on amortizing research and development costs, see section 174 of the Internal Revenue Code and the related regulations.

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