For purposes of this section, any amount paid or incurred in connection with the development of any software shall be treated as a research or experimental expenditure."
https://www.law.cornell.edu/uscode/text/26/174
This would even include the "expenses as incurred" such as the labor.
There is currently a proposal on the House floor to return to the prior full expensing of research and development costs, but it hasn't passed yet.
This was put in effect to force lower expenses, and higher income for companies, therefore creating more tax collection.
The good news is there is a research credit available for a portion of the costs.
"The research credit is generally allowed for expenses paid or incurred for qualified research. Qualified research means research for which expenses may be treated as section 174 expenses. This research must be undertaken for discovering information that is technological in nature, and its application must be intended for use in developing a new or improved business component of the taxpayer. In addition, substantially all of the activities of the research must be elements of a process of experimentation relating to a new or improved function, performance, reliability, or quality. These tests to determine qualified research must be applied separately with respect to each business component of the taxpayer. The research credit generally isn’t allowed for the following types of activities.
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Research conducted after the beginning of commercial production.
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Research adapting an existing product or process to a particular customer’s need.
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Duplication of an existing product or process.
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Surveys or studies.
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Research relating to certain internal-use computer software.
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Research conducted outside the United States, Puerto Rico, or a U.S. possession.
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Research in the social sciences, arts, or humanities.
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Research funded by another person (or governmental entity)."
Taken from the IRS instructions here: https://www.irs.gov/instructions/i6765
Hope this helps!
Cindy
