CREATE JOBS Act Makes 100% Tax Write-Offs Permanent, Forces Immediate R&D Expensing, and Tweaks Real Estate Depreciation

The newly proposed CREATE JOBS Act (officially the Cost Recovery and Expensing Acceleration to Transform the Economy and Jumpstart Opportunities for Businesses and Startups Act) is a major overhaul of how businesses handle three big tax buckets: equipment purchases, commercial and rental property depreciation, and research and development (R&D) costs. Simply put, this bill is all about accelerating tax deductions, shifting the timing of when businesses get their tax breaks.

The Permanent 100% Write-Off: Buy Now, Deduct Now

For businesses that invest in new equipment—think a construction company buying a new crane, a manufacturer purchasing a new assembly line, or a bakery getting a new oven—this bill makes a huge difference. Currently, businesses can immediately write off 100% of the cost of certain qualified property, but this benefit was set to phase out. Section 2 makes this full, 100% expensing permanent. This means if a small business spends $50,000 on a new piece of machinery, they can deduct that full $50,000 from their taxable income in the year they buy it, rather than stretching that deduction out over five or seven years. This is a massive incentive for capital investment, and the bill even applies this change retroactively to assets placed in service after September 27, 2017.

Inflation-Proofing Real Estate Depreciation (If You Can Figure It Out)

Section 3 introduces what it calls a “Neutral Cost Recovery Adjustment” for depreciation on residential rental property and nonresidential commercial property. This is where things get complicated. Instead of just taking the standard depreciation deduction, taxpayers multiply that amount by a complex ratio designed to adjust for inflation using the Gross Domestic Product (GDP) deflator. The goal is to ensure that the value of the depreciation deduction keeps pace with rising prices over the building’s lifespan. If you own a rental property, this could mean a slightly higher deduction each year. However, the calculation is highly technical, involving quarterly GDP deflator numbers and a specific formula ($1.03$ raised to the power of $n$, where $n$ is years since service). The good news for busy people: taxpayers can elect out of this adjustment for any specific property, which might be a smart move for those who want to avoid the administrative headache of calculating this ratio every year.

The R&D Rule Change: Immediate Deduction, Less Flexibility

For companies engaged in innovation—from software startups to pharmaceutical firms—Section 4 changes the game for research and experimental (R&E) expenditures. Previously, businesses had the option to amortize these costs, meaning they could spread the deduction out over at least 60 months, which was useful for matching expenses to when the revenue from that R&D came in. This bill eliminates that option entirely. Now, businesses must treat all R&E costs as an immediate expense in the year they happen. While an immediate 100% deduction sounds great, it removes flexibility. For a startup with high initial R&D costs but low early revenue, spreading the deduction out might have been more beneficial. Now, they must take the full deduction right away.

This section also creates a complex interaction with the existing Research Tax Credit (Section 41). If a business claims the research credit, they can’t also take the full deduction for those same expenses. This forces companies to choose: either take the full, immediate deduction, or take the research credit but accept a reduced deduction. This trade-off requires careful tax planning and could reduce the overall benefit for businesses that rely heavily on the R&D tax credit.