Tax Treatment of Website Development Costs
Profit Ability Article Highlight

Most businesses hire outsiders, such as independent contractors, to develop their web sites. Others utilize in-house talent. Either way, you'll want to be sure you are correctly dealing with costs related the development of your website.

By hiring an independent contractor to develop a complete web site, you may be "purchasing" the "software" in the eyes of the IRS. If this is the case, a full deduction would not be allowed, but rather a 36 month amortization of the purchased software should be claimed. This expense method would depend largely on the type of arrangement the business made with the contractor and the nature of the web site. For instance, if the site is redesigned annually, it could be argued that the cost should be expensed.

Additionally, if the web site is considered "purchased software," but with a useful life of less than 36 months, then the amortization would be shorter than 36 months. There are many specifics that could determine how you are able to expense your company's website, and if you have any questions please feel free to contact us with any questions regarding this matter.