Tax Blog

Depreciate a Web Based Business?

Many investors and business owners know all about the potential of depreciating equipment they invest into their company. Depreciation is a common deduction that helps businesses, especially small businesses, buy the equipment they need to help their customers. But how does this apply to online businesses? Does it apply to online businesses? You might be thinking why should physical businesses with assets like machinery gain all the benefit? Well good news to you online retailers, there may depreciation for you as well.

Under section 179 of the tax code, there is depreciation available for computer software, so long as it is not customized. For instance, buying standard retail software of an operating system would qualify for eligible depreciation and the deduction. Here’s the tricky part, what about the web based portion of the software. If your website is based on “C++” language, which is commonly used, there is a very good chance this qualifies for the deduction. So any time and work put into designing your website can result in your deduction. Furthermore, you will still be able to gain deductions for advertisements just as a regular business.

It becomes more complicated when other website languages become involved as they are more customizable, take for instance HTML. It is debated whether this stands up to the noncustomizable test for computer software. If you run a web based business and are curious about available depreciation, contact the professionals at the Center for Financial, Legal & Tax Planning, Inc.

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