This blog explains how system integrators can qualify for the R&D tax credit by documenting and claiming innovative activities such as custom software development, system integration, network infrastructure, and cybersecurity.
To be eligible for the R&D tax credit, a system integrator’s activities must involve technological uncertainty. This often includes the following:
If eligible, system integrators should not pass on this credit. The R&D tax credit can provide substantial tax benefits that may free up funds for future innovation. Also, claiming the credit acknowledges the value of your work, encourages further research and development, and can give you a competitive edge that allows you to offer cutting-edge solutions to your clients.
To ensure you can take the credit without unnecessary setbacks, be sure to document your work. Keep detailed records of your R&D activities, including project timelines, technical challenges, and solutions.
Also, stay up to date on regulations. R&D tax credit rules change, so being informed is crucial. As such, it often makes sense to consult with a professional. Companies with long-standing expertise helping firms with credits and incentives can help ensure proper documentation, optimize savings, and streamline the claiming process.
By understanding the R&D tax credit and actively pursuing eligible activities, system integrators can unlock significant tax savings and fuel future innovation.
In July, the One Big Beautiful Bill Act (OBBBA) restored immediate expensing of domestic R&E costs under Section 174 beginning in tax year 2025, with retroactive relief back to 2022 for certain small businesses (those with average annual gross receipts under $31 million). For all other companies, any remaining amortized expenses from 2022–2024 can be fully deducted in 2025 or split between 2025 and 2026. In practice, this means system integrators can once again deduct their U.S. research expenses in full rather than amortizing them over five years. (Foreign research costs must still be amortized over 15 years.)
In August, the IRS issued Revenue Procedure 2025-28, which clarified how these changes apply. For 2024, taxpayers filing a timely original return on or before Nov. 15, 2025, are automatically deemed to have elected immediate expensing if they deduct their R&D costs and no additional statement is required. However, electing to deduct in 2024 triggers a consistency requirement: companies must also amend 2022–2023 returns to deduct expenses that were previously amortized, since the rules do not allow picking and choosing years. That said, taxpayers are not required to take this approach: electing immediate expensing is optional.
Because every company’s situation is different, it’s important to carefully evaluate these options. Businesses should review Revenue Procedure 2025-28 and consult with their tax advisers or CPAs to determine the best path forward based on their facts and filing history.
Samantha Wenden is a senior R&D consultant at EPSA USA, where she helps businesses maximize their R&D tax credit benefits. With years of experience in both national tax advisory and accounting firms, Wenden specializes in the software and technology sectors, including AI, cloud computing, and emerging technologies. She is known for her ability to simplify complex tax credit processes and build strong, collaborative relationships with clients.
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Statements of fact and opinion are the authors responsibility alone and do not imply an opinion on the part of the PICPA's officers or members. The information contained herein does not constitute accounting, legal, or professional advice. For actionable advice, you must engage or consult with a qualified professional.