alt Hacker NewsI doubt if this will make much difference. Offshoring as a tactic emerged in the pandemic when companies realised that being “remote” works just as well.
Sure, foreign R&D still gets amortized over 15 years (NPV ≈59 % of a full write-off, so you “lose” ~8.6 % of your R&D spend in present-value terms, and only 6.7 % of the cost is deductible in year 1, creating a 19.6 % cash-tax gap). But offshore wages are often 50–70 % below U.S. rates:
• Even after the slower amortization drag, hiring at half the cost nets you ~30 % total savings on R&D headcount.
• On a pure cash basis you only need ~20 % lower wages to break even; most offshore markets easily exceed that.
• So the labor-cost arbitrage far outweighs the tax timing penalty unless your foreign salaries are less than ~20 % below U.S. levels.
In short: the 15-year amort rule hurts your tax deduction, but 50 %+ lower offshore wages more than make up for it.
Replies
> Offshoring as a tactic emerged in the pandemic when companies realised that being “remote” works just as well.
If I read properly this is explicitely targeting UE, Canada, UK and other countries with high wages and R&D and software engineering capabilities.
Won’t make much of a difference? To what?You’re only talking about whether to offshore or not. Not whether to HIRE or not.
Many companies simply won’t offshore core functions because doing product development on your core product with a team in a different time zone or from a very different culture often doesn’t work. But this will matter to companies that have laid off US engineers or avoided hiring and now won’t have that extra tax burden.
Not convinced. Offshore has been possible since forever. Maybe IC cam be remote now. Your team can be global. US lead, 2 India based devs, 2 brazil devs. But not having this wasn't a blocker for saving money.
10, 100 or 500 people team in India who could work in the office together was possible forever.
It will change. I think once other countries become bigger investment centres. Not sure how yet though. US is a good potting soil for a startup because there is this huge addressable and free market. And the startup ecosystem. Then add in that most startups want WFO and minimum synced time zones... and for larger tech all that specialism is in house in the US.
It's not possible, really, to believe that markets are inefficient enough to pay twice the price for something in one place as another...
> Offshoring as a tactic emerged in the pandemic when companies realised that being “remote” works just as well.
Offshoring is far older than the pandemic.
It is delusional to think you get same quality work for 70% less price.
This ignores the other financial and non-financial costs of offshoring: legal, cultural, temporal... a lot of the time, those close the gap.
On paper, offshoring has made sense the entire time, and yet here we are in 2025 and companies still hire American devs. Not only that, they often fly in foreign devs just to pay them more here than if they had just offshored to their home country.