The IRS released guidance back in 2023:
https://www.irs.gov/pub/irs-drop/n-23-63.pdfIt starts on page 23.
Plenty of analysis online by tax firms but I'll quote from this one: https://insightplus.bakermckenzie.com/bm/attachment_dw.actio...
> Generally, activities treated as software development for section 174 purposes include, but are not limited to, the following.
• planning the development of the computer software
• designing the computer software
• building a model of the computer software
• writing source code and converting it to machine-readable code
• testing the computer software (up to the point that a taxpayer places the computer software into service or determines that the computer software is ready for sale or licensing to others)
• producing product master(s), if the taxpayer develops the computer software for sale or licensing to others.
> Activities that are not treated as software development vis-à-vis software developed by a taxpayer for use in its trade or business are as follows:
• training employees and other stakeholders that will use the computer software
• maintenance activities after the taxpayer places the computer software into service
• data conversion activities, except for activities to develop computer software that facilitate access to existing data or data conversion
• installing the computer software and other activities relating to placing the computer software into service
It starts on page 23.
Plenty of analysis online by tax firms but I'll quote from this one: https://insightplus.bakermckenzie.com/bm/attachment_dw.actio...
> Generally, activities treated as software development for section 174 purposes include, but are not limited to, the following.
• planning the development of the computer software
• designing the computer software
• building a model of the computer software
• writing source code and converting it to machine-readable code
• testing the computer software (up to the point that a taxpayer places the computer software into service or determines that the computer software is ready for sale or licensing to others)
• producing product master(s), if the taxpayer develops the computer software for sale or licensing to others.
> Activities that are not treated as software development vis-à-vis software developed by a taxpayer for use in its trade or business are as follows:
• training employees and other stakeholders that will use the computer software
• maintenance activities after the taxpayer places the computer software into service
• data conversion activities, except for activities to develop computer software that facilitate access to existing data or data conversion
• installing the computer software and other activities relating to placing the computer software into service