Write Off Your Website Development Costs
You have spent a lot of money on developing the website for your business. Basic sites done by graphic designers cost several thousand dollars and can run into six figures. Can you consider any of that a business deduction?
According to this article the IRS has not issued formal guidelines on the tax treatment of website development costs. However, it says, informal internal IRS guidance suggests you treat the costs like an item of software and depreciate those amounts over three years.
The previously cited article says taxpayers who pay large amounts to develop sophisticated websites have been allocating their costs to items such as software development, which is deductible as Section 174, research and development costs or even advertising costs.
At the same time, the IRS says plain-old computer software that is or has been readily available for purchase by the general public, is subject to a nonexclusive license, has not been substantially modified and was not acquired in connection with the acquisition of a business is not a deductible intangible asset. So, tread carefully, but be creative when it comes to writing off your website and software costs.