New Tax Code Update Makes Discovery Work More Financially Strategic
For the past two years, companies across industries have felt the impact of Section 174 of the U.S. tax code—a change that required R&D expenses to be amortized over five years. While intended to encourage long-term innovation, this shift had unintended consequences: it increased the short-term cost of experimentation and deprioritized early-stage research activities like usability testing, field studies, and concept validation.
But now, the landscape has changed—and it’s good news for product and finance leaders alike.
A Strategic Reversal: R&D Can Be Expensed Again
As of 2025, U.S. businesses can once again fully expense R&D activities in the year they’re incurred—reversing the amortization rule that had made core discovery work harder to justify on balance sheets.
This includes a wide range of User Experience (UX) research methods used in early product development:
- Foundational discovery research
- Usability testing
- Field studies and ethnographic research
- Design validation and concept testing
- Mixed-method studies that bridge qualitative insight with quantitative rigor
What This Means for Finance, Tech, and Research Leaders
If you’re a CFO, CTO, or Head of Research, here’s why this shift matters:
✅ Research Just Got More Cost-Efficient
Budget owners can now treat UX research activities as immediate deductions—making them far easier to fund without long-term accounting penalties.
✅ A New Window to Rebuild Insight Capacity
Teams that previously paused discovery research can restart initiatives with stronger financial justification. This is the moment to re-invest in understanding the “why” behind your users’ behavior—and align products more closely with real needs.
✅ Hiring and Partnering for UX Is Easier to Justify
Whether you’re scaling an internal team or working with a research partner, this change makes it easier to make the case for investing in strategic insight. UX researchers and design strategists are no longer just product enablers—they’re smart financial moves, too.
Research Has Always Delivered ROI. Now It Comes With Tax Benefits.
The ROI of UX research is well documented: it reduces rework, drives adoption, prevents usability flaws, and aligns digital products with evolving customer expectations.
Now, thanks to this tax change, investing in research isn’t just a smart strategic move—it’s also a fiscally sound one.
At Key Lime Interactive, we help teams across Fortune 500 turn user insight into business advantage. Whether you need to scale up research capacity or reboot stalled initiatives, we’re here to help you move forward—with confidence and clarity.
👉 Need help planning your next research investment? Let’s talk.