When it comes to website development, the costs incurred for creating, designing, and programming a website are usually treated as a capital asset. This means that they cannot be spent or deducted immediately, but must be deducted over a period of time. Depending on the budget and the website development service provider, organizations can choose between two different deduction methods. The amount spent on website development costs depends on the total business that can be expected from a well-presented website.
For tax purposes, the distinction between internal and outsourced development lies with the person responsible for the functionality of the website. A website can also be developed for internal access, to store company policies, customer details and search for relevant information. When it comes to website development costs, proper planning and a comprehensive strategy are essential in order to capitalize on them. A completely new site or the expansion of a new critical utility requires an examination of the expenses required in the different phases of development.
Professionally designed websites come at a cost, but several of these costs can be deducted on your tax return. Generally accepted accounting principles related to the capitalization of initial costs and website development costs must also be taken into account. The development stage of the application and infrastructure of the website involves the acquisition or development of hardware and software to operate the website. If you opt for the position that your website is primarily advertising, you can currently deduct the website's internal software development costs as an ordinary and necessary business expense.