[gortok]

It was a combination of factors: zero interest rate policies changed to fight inflation and the Tax Cut Jobs act of 2017 changes (section 174) requiring capitalization of everything softwsre development related except bug fixes went into effect for tax year 2022.

If software developer salaries cannot be expensed and it’s now 5 times more expensive to borrow money to expand, jobs will be lost.

Oh, and the TCJA was championed and signed into law by then President Trump.

[gruez]

>and the Tax Cut Jobs act of 2017 changes (section 174) requiring capitalization of everything softwsre development related except bug fixes went into effect for tax year 2022.

Seems like a stretch. "Software Development Job Postings on Indeed in the United States"[1] was up into the beginning of 2022. The tax changes were known in advance for years. If the tax code changes were a significant factor, why did companies hire a bunch of people in 2021, knowing that when 2022 rolled around there would be massive taxes?

[1] https://fred.stlouisfed.org/series/IHLIDXUSTPSOFTDEVE

[gortok]

> Seems like a stretch. "Software Development Job Postings on Indeed in the United States"[1] was up into the beginning of 2022. The tax changes were known in advance for years. If the tax code changes were a significant factor, why did companies hire a bunch of people in 2021, knowing that when 2022 rolled around there would be massive taxes?

Gruez... Income Taxes are paid the year after they're incurred. Tax Year 2022 is filed and paid in 2023. The effects wouldn't start being felt until March 2023 at the earliest.

Also, literally everyone involved in tax policy thought it would be repealed. Heck, the IRS had to scramble to release guidance because they thought it was going to be repealed. The IRS didn't release detailed guidance on Section 174 until September 2023 -- six months after tax filings were due (a number of businesses asked for an extension to file but still had to pay the taxes as if they had filed on time). https://www.cohnreznick.com/insights/additional-guidance-irs...

The Section 174 capitalization for software development was included in the TCJA as a way to 'pay' for the tax cuts, but no one seriously believed it would stay in the law. The problem is congress is very dysfunctional, so once it was signed into law you'd need a congress to get it out. It's no surprise the congress in 2023 was more dysfunctional than the one in 2017.

Also, in 2021 interest rates were historically low, and as I stated initially the dual loss of the ZIRP environment and the massive change to how software developer policies worked together to kill software development jobs.

[gruez]

>Gruez... Income Taxes are paid the year after they're incurred. Tax Year 2022 is filed and paid in 2023. The effects wouldn't start being felt until March 2023 at the earliest.

First off, 2022 taxes are not paid in 2023. Corporations have to pay taxes quarterly, not yearly.

https://www.irs.gov/businesses/small-businesses-self-employe...

Second, no CFO is going to going to accept "this year's engineering expenses might be 100% more expensive (because we can't deduct it), but it's only due next year so we can keep on hiring!". The whole point of accounting is modeling the company's books to reflect its financial situation as accurately as possible, not just looking at whatever the bank balance is. This includes modeling future tax obligations.

[gortok]

Gruez. You pay payroll and estimated taxes quarterly. As long as you hit 90% of your actual tax burden, there are no penalties. You file income tax yearly and that sets you up for both your remaining burden that you didn't pay in estimated taxes, and your future estimated taxes. The trick is when you go to file by March 15th, you may or may not have accounted for all of the vagaries of tax changes -- and in fact the IRS pushes out guidance throughout the year that will affect the filing process.

For companies that were expensing 100% of developer salaries (which was a lot of them -- capitalization is very cash intensive), having to now eat 80% of that salary as profit and only being able to deduct 20% is devastating.

1171(!) small software companies have come together to try to get congress to repeal their changes to Section 174. They haven't been successful yet, but here's hoping that by further education of folks like yourself, they will be. https://ssballiance.org/

[nirav72]

Yeah. This is a thing lot of people don't understand or see . When they think of Software Developers - they tend to focus on SV companies or FANG. But most software devs work in corporate IT. In that world, IT is a cost center and rarely a profit center. So when cost of anything rises and they need to cut back to boast revenue numbers - it's always the cost center that takes the first hit. In this case, the cost of borrowing dramatically went up.