Ah, tax season. Everyone’s (least) favorite time of year. A time when we all must begrudgingly review our finances to determine how much of our money goes into the pockets of the government.
Trust me, it’s a whole lot worse for entrepreneurs.
See, most people at least have their company’s leadership behind them. They’ve probably got a competent accounting team, a clear delineation between personal and professional, and finances that are fairly easy to sift through.
Not so for business owners – especially first-timers. They’re on their own, flying blind as to what constitutes a deductible business expense and what’s simply considered the cost of doing business. Oddly enough, web hosting is very often a major point of contention in this regard.
Partially, this is because the IRS hasn’t really released any concrete guidelines where website costs are concerned. Many businesspeople, unfamiliar with the nuances of dealing with the nation’s tax department, are thus left in the dark. The good news is that there are a few pre-existing clauses in the IRS’s policies that can help us suss things out.
First, there’s how the IRS treats software development and design costs put towards the launch of a business website. It’s a bit complicated, but what it ultimately boils down to is this. Web design costs and man-hours that require the use of complex programming languages or coding are deductible up to a certain limit.
If your company website is designed and developed entirely in-house, it’s more or less your call as to what you deduct. Web advertising is also generally treated as deductible, as is most business-oriented website content. Similarly, general operational costs – hosting fees, business software licenses, etc. – can also be treated as deductions.
The only exception to this rule is costs that were accrued before a business was technically founded. These fall into a sort of gray area. In such situations, the best course is ‘usually better safe than sorry.’
At the end of the day, you can treat pretty much everything about your website as a business expense. After all, these days it’s essential for modern organizations to maintain a web presence. Those that don’t are destined to be left behind.