Whether you are a startup who just got a shiny new website to help launch your business or you are an existing business that got a website makeover; you might want to read on so you can get some nifty tax benefits from your project. Doesn’t matter if you got services from one-woman creative like myself or a giant big-box agency — your website project is tax deductible!
Are you happily surprised that you can deduct web development costs on your taxes? You can use the amounts you spend to put up a website and keep it going to offset the income you bring in from helping your customers.
How to deduct web development costs
Which website development costs can you deduct? Well, first things first. You need to have a business purpose for your website. You can deduct the costs of the website. If it’s for personal use as a family website to share photos or a blog site that does not produce an income you will not be in luck. No business use, no deduction.
You’ll face three different situations that will determine when and how you can deduct web development costs.
1. You develop the website or pay someone to do it before you start your business.
Just launching? The costs associated with a website are considered start-up costs. In this case, you will need to decide whether to
- Deduct up to $5,000 of the costs in the year that your business started or if less than that but more than $600 (like in the case with most 8 Create clients), you and your creative can do W9’s.
- Amortize (meaning deduct over a period of time) any of the costs beyond the $5,000 over 15 years, starting with the month that the business starts. Which is more likely if you plan to be an on-going client to your creative.
If you don’t decide to do go the startup route, the expenses are only deductible when you shut down or sell your business.
There are other cases in which you buy a website from an agency and would the website would qualify as “section 179 property,” and will be considered eligible for the immediate deduction in the current year. For 2018, the 179 deduction is up to a maximum of $510,000. Yikes!
2. You are an existing business.
- If you needed a website makeover and your project goes over $600 ask your creative for a W9 which you both will file during tax time.
Are website hosting costs deductible?
In addition to the web development costs, you might also incur some hosting fees for your website. These would be considered dues and subscriptions, and are deductible on your return.
The above content should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation!
Do you fall into one of these categories, but don’t have the website you want yet? Get in touch with
Jacquelyn / 8 Create today to discuss getting started.