Some brick and mortar business owners shy away from the investment of a company website. But, in order to run a successful business in 2018, you need a business website.
We all understand that designing and launching a new website can be a daunting task, and often a costly one. But, the good news is that your business website may be tax deductible, so read on to learn more.
A Basic Guide to Website Design Tax Deductions for the New Business Owner
As a new business owner, you might want to know whether the costs of website design are tax deductible, leading up to the new tax year.
Good news! A lot of what goes into designing, launching, and maintaining a business website is deductible because it typically falls under “marketing.”
While we are simply website people and we can only provide you with our interpretation of the IRS’s rules, we do know a little about what you can and can’t write off when it comes to your business website. But, ultimately, you should definitely speak to a certified tax professional about whether your website design and maintenance costs are tax deductible.
So, How Do You Write-Off Website Expenses?
First off, it would seem that there are no formal guidelines as to whether website design, development, and maintenance costs can be deducted. In order make it work, some tax people recommend including it in write-off categories that correlate closely with a website as a tool and business asset.
A new business website will require quite a bit of upfront costs, including design, development, platform fees, and subscription costs. Because of this wide range of individual costs, the rules will sometimes differ, as website design may be considered a start-up cost.
Code 197 governs Amortization of Goodwill and Certain Other Intangibles reads as follows:
“A taxpayer shall be entitled to an amortization deduction with respect to any amortizable section 197 intangible. The amount of such deduction shall be determined by amortizing the adjusted basis (for purposes of determining gain) of such intangible ratably over the 15-year period beginning with the month in which such intangible was acquired.”
Websites are intangible, which means that this category is best suited to website costs.
However, a website design has a relatively short lifespan – it is standard practice to refresh the site content once a year and redesign the entire site every three or four years – and should therefore not be deducted over fifteen years.
What If My Website Is Software-Related?
Websites that are considered software follows the rules for Tax Deduction Guidelines for Purchasing Software. As such, a software website’s costs can be amortized over the three years following the date it goes live.
Your website may be considered software if:
- It dynamically interacts with users.
- It interactively generates data.
This means that many e-course platforms may be considered software depending on the extent of the customizability and user interaction required to return data.
How About Advertising or Marketing-Related?
When website design is considered advertising, it opens the door to the most favorable tax write-off category. However, insofar as can be deduced, only websites with product listings or displayed products may be considered as advertising.
Ideally, you should speak to your accountant about the best way to claim tax deductions for your website and related costs. While you’re at it, don’t forget to ask about:
- Personal funds invested in your business.
- Charitable donations.
- Home office space or co-working spaces.
- Office phone use.
- Business travel costs.
Don’t overlook any available tax deductions this year. A professional accountant can talk you through all the different options.