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.
Business owners, especially first-timers, often face this challenge alone. They must navigate what counts as a deductible expense versus a regular business cost. Surprisingly, web hosting is frequently a point of confusion in this area.
IRS hasn’t really released any concrete guidelines
Partially, this is because the IRS hasn’t really released any concrete guidelines where website costs are concerned. Many business people, 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 designs and develops its website in-house, you largely decide what to deduct. Web advertising and most business-related website content are generally deductible. Similarly, operational costs such as hosting fees and business software licenses are also deductible.
Costs incurred before a business was officially established are the exception. These costs fall into a gray area. In these situations, it’s often best to play it safe
Ultimately, you can classify almost all website-related costs as business expenses. A web presence is essential for modern organizations. Companies without one risk falling behind.
