For many product and research leaders, the last few years have felt like an uphill battle for budget. Starting in 2022, a mandatory shift in tax rules required companies to capitalize and amortize domestic research costs over five years, rather than deducting them immediately. This made the “on-paper” cost of innovation look higher, often causing stakeholders to hesitate on large-scale research initiatives.

However, with the introduction of Internal Revenue Code (IRC) Section 174A, the landscape has shifted back in favor of immediate action.

The Shift: From Amortization to Immediate Expensing

Section 174A officially restores the ability for businesses to immediately deduct domestic research and experimental (R&E) expenditures in the same tax year they are incurred. For UX and CX research buyers, this effectively removes the “tax friction” that previously slowed down project approvals.

5 Reasons Section 174A is Your Best Argument for Budget Approval

• Immediate Financial Relief: Unlike the mandatory five-year wait under previous rules, your 2026 domestic research spend can now be fully deducted in the current year, providing an immediate boost to your company’s cash flow.
• A “Pure-Play” Incentive: Because Section 174A specifically applies to domestic research, it incentivizes organizations to invest in high-quality, U.S.-based research partners rather than off-shoring. This ensures higher data integrity and more actionable insights tailored to your specific market.
• Retroactive “Found Money”: Eligible small businesses can retroactively apply Section 174A to their 2022–2024 expenditures. This allows them to amend past returns and potentially unlock significant refunds to reinvest into their 2026 product strategy.
• Reduced Administrative Burden: Immediate expensing simplifies the tracking of R&D costs. Instead of managing complex multi-year amortization schedules for a single usability study, teams can account for the investment and move forward.
• De-Risking Complex Initiatives: Whether you are navigating the move to Responsible AI or preparing for WCAG 3.0 accessibility standards, the cost of this “non-discretionary” research is now more tax-efficient than ever before.

The Bottom Line for Research Leaders

UX Research has always been a non-discretionary investment for driving long-term organizational performance. However, with the transition to IRC Section 174A, your 2026 research initiatives are now more tax-efficient than they have been in years. By moving away from multi-year amortization and back to immediate expensing, your organization can prioritize the deep, human-intensive work required to validate AI outputs and ensure digital accessibility without the financial drag of deferred tax benefits.

Partner with a Proven Authority in Enterprise UX

Navigating the complexities of high-stakes product design requires a partner with a long-standing track record of excellence. Key Lime Interactive is a premier full-service research firm, bringing nearly 20 years of specialized expertise to every engagement. Our client list includes some of the biggest names in technology and product development, as well as leaders and challengers across the financial, automotive, and insurance sectors.

Ready to leverage the tax advantages of Section 174A for your next domestic research program?

Contact us today to learn how our expert practitioners can help you lead the way in 2026.