Good news for the tech job market buried in the “big beautiful bill”

[andhra_jp]

The impact of this change on software and technology companies cannot be overstated. Many companies have had their taxable income increase dramatically because they can no longer deduct expenses. In fact, some companies have gone from being unprofitable to profitable and liable for federal and state taxes due to the change.  

To illustrate the impact: Suppose Taxpayer X is a software company developing accounting software. In 2021, X had $15 million in revenue. X also had $8 million in salary expenses, of which $6 million were for software developers and engineers. X spent an additional $2 million in rent and utilities, half of which were allocated to R&E expenditures. In 2021, X can deduct all $8 million in salaries and $2 million in rent and utilities, leaving $5 million in taxable income. In 2022, X is only able to fully deduct the $2 million in salaries and $1 million in rent and utilities that are not connected to software development. X must now capitalize the $6 million in salaries and $1 million in rent and utilities that are attributable to software development, and then may only deduct 10% ($700,000) for 2022 due to the mid-year convention requirement. X’s taxable income in 2022 would be $11.3 million – more than twice X’s taxable income in 2021. 

[ARYA]

5 hours ago, Tellugodu said:

I don’t think massive Covid hiring will be back anytime soon (if it ever happens).

Ok

[Konebhar6]

4 hours ago, Mr Mirchi said:

example:

 

 

CodeSpark Inc., a small tech startup, hires 10 software developers.
They each earn $100,000 a year, so total cost = $1 million on developer salaries.

 

🔙 Before the tax change (old rule):

• The IRS made companies spread the deduction over 5 years.

• So in Year 1, CodeSpark could only deduct $200,000.

• Let’s say the company pays 21% in taxes.

• $200,000 × 21% = $42,000 in tax savings for Year 1.

➡️ So even though they spent $1M, they only saved $42K on taxes that year.

---

✅ After the tax change (new rule):

• CodeSpark can now deduct the full $1 million in Year 1.

• $1,000,000 × 21% = $210,000 in tax savings immediately.

➡️ That’s a $168,000 bigger tax break — right away!

 

 

What does CodeSpark do with that extra $168K?

• Hire another developer

• Offer raises or bonuses

• Invest in new tech features or tools

Because companies now get bigger tax savings right away, they’re more likely to:

• Hire more developers

• Keep current staff

• Spend more on tech and innovation

Which is why this is considered good news for tech jobs.

I call this BS.

As per the old rule -> Consider spreading this over 5 yrs. Consider a company spending $1M every year on developers.

In year 1, company gets a tax break of 42k. Year 2 they get $84k, likewise from Year 5 its $210k every year. 

Its good for companies to get tax break immediately but it would in no way result in hiring another developer. It shows up nicely in earnings. 

[ARYA]

2 minutes ago, Konebhar6 said:

I call this BS.

As per the old rule -> Consider spreading this over 5 yrs. Consider a company spending $1M every year on developers.

In year 1, company gets a tax break of 42k. Year 2 they get $84k, likewise from Year 5 its $210k every year. 

Its good for companies to get tax break immediately but it would in no way result in hiring another developer. It shows up nicely in earnings. 

Thats enough for many mid range start ups to suck up to the board members for next series funding…this is huge for them..