TL;DR: For most businesses, website design costs qualify as an ordinary and necessary business expense and are deductible. The catch is timing. The IRS treats design and build costs as a capital expense, so you depreciate them across their useful life instead of writing the whole thing off in year one. Ongoing maintenance and updates work differently and aren't depreciated. Small businesses that pay to make a site ADA accessible may also qualify for the Disabled Access Credit, worth up to $5,000. Talk to your own tax professional before you act on any of this.
A website is a basic requirement for most businesses now, and building one costs real money. That leads to a fair question at tax time: can you deduct it? In most cases, yes. And if you spent money making the site ADA accessible, you may also qualify for a tax credit under Section 44 of the IRS tax code.
What counts as a website design cost
These are the expenses tied to creating and maintaining a website: fees paid to designers or developers, purchases of themes, plugins, and other tools, and the cost of maintenance and updates.
How the deduction works
The IRS lets businesses deduct "ordinary and necessary" expenses for their trade or business. The expense has to be standard and accepted in your industry, and helpful and appropriate for your business. Website design costs usually clear that bar.
The wrinkle is classification. Website design is a capital expense rather than a regular operating expense, so you can't deduct the full cost in the year you paid it. It gets depreciated over time instead.
Depreciating the cost
Depreciation spreads the cost of a capital asset across its useful life. The specific period depends on the nature of the expense.
Say you paid a developer $10,000 to build a new site and depreciate it over five years. You'd deduct $2,000 per year for five years rather than the full $10,000 up front.
Which costs depreciate and which don't
Not everything gets depreciated. The IRS treats costs directly tied to creating the website as depreciable, including design fees and theme costs. Ongoing maintenance and update costs aren't capital expenses, so they don't get depreciated.
Separately, making your website ADA accessible can put you in range of a tax credit under Section 44.
What ADA accessibility means
ADA accessibility refers to the guidelines set by the Americans with Disabilities Act, which requires businesses to make their websites usable by people with disabilities. That covers content people with visual or hearing impairments can access, and functionality people with mobility impairments can operate.
The Disabled Access Credit
In 2018 the IRS introduced a tax credit for small businesses that make their websites ADA accessible. The Disabled Access Credit provides up to $5,000 to help offset that work.
To qualify, a business must have fewer than 30 full-time employees and either earned less than $1 million in gross receipts the previous year or posted a net profit under $50,000 the previous year. The business also has to incur expenses related to making the website accessible, such as hiring a developer to implement accessibility features.
How to claim it
File IRS Form 8826, Disabled Access Credit, with your tax return. Businesses can claim credit for 50 percent of eligible expenses.
A necessary disclaimer
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FAQs
Can I deduct the full cost of my website in the year I paid for it?
Generally no. The IRS treats website design and build costs as a capital expense, so they're depreciated across their useful life rather than deducted all at once.
What website costs are depreciable?
Costs directly tied to creating the site, such as design fees and theme purchases. Ongoing maintenance and update costs aren't treated as capital expenses.
What is the Disabled Access Credit worth?
Up to $5,000. Eligible businesses can claim credit for 50 percent of qualifying expenses related to making their website ADA accessible.
Who qualifies for the Disabled Access Credit?
Businesses with fewer than 30 full-time employees that either earned under $1 million in gross receipts the previous year or had a net profit under $50,000, and that incurred expenses making their website accessible.
How do I claim the credit?
File IRS Form 8826, Disabled Access Credit, along with your tax return. Check the specifics with your own tax professional first.
