American Innovation Act of 2026

Immediate Deductions for New Businesses: Taxpayers can elect to have a deduction for start-up and organizational expenditures in the year their active trade or business begins (Section 2(a)(1)(A)). This deduction is capped at $20,000, subject to certain limits.

Amortization of Remaining Costs: For expenditures that exceed the initial deduction cap, the bill allows the remaining amount to be charged to a capital account and recovered via an amortization deduction over 180 months (Section 2(a)(1)(B)).

Inflation Adjustments: To ensure the tax benefits keep up with economic changes, the $20,000 and $120,000 amounts are subject to inflation adjustments based on cost-of-living adjustments (Section 2(a)(1)(3)).

Deductions Upon Business Closure: If a partnership or corporation is liquidated, or if a trade or business is completely disposed of or discontinued, taxpayers may be allowed to deduct the remaining start-up expenditures (Section 2(c)).

Limits on Immediate Deductions: The deduction for start-up and organizational expenditures is limited to the lesser of the actual aggregate amount or $20,000, which is further reduced if the aggregate amount exceeds $120,000 (Section 2(a)(1)(A)(ii)).

Reductions in Losses After Ownership Change: When a corporation undergoes an ownership change, certain net operating loss carryforwards that arose during a "start-up period" may be reduced (Section 3(a)).

Reductions in Unused Tax Credits: Similar to the treatment of losses, unused general business credits that arose during a start-up period may be reduced upon an ownership change (Section 3(b)).