How to Deduct the Cost of Online Apps and Software
Heads up: this article is only relevant for U.S. businesses.
These days, you’d be hard-pressed to find an entrepreneur that didn’t use a combination of software, apps, and online tools to run their business.
Thankfully, the cost of business-related software, apps, and online tools is tax deductible. Here are some of the common expenses you may be able to claim in this category.
Having a fast and reliable internet connection is a requirement for almost every business. The cost of an internet service is fully deductible as either an office expense or utility expense. However, if you run the business out of your home, you’ll need to factor personal use into the claim. If you use the connection all day for business and then the family uses it in the evenings as well, you need to calculate the percentage of work usage and apply that number to the internet provider fees. This new number is the amount you can claim.
Domain registration and web hosting
Your business website plays an integral role in your brand image, whether it’s a full storefront, or a simple landing page. Fortunately, you can generally deduct internet related expenses, including domain registration fees. These expenses are deducted on Schedule C, as other expenses. Note that if the business is new, you may need to amortize these expenses as start-up costs.
Online tools and apps
Tools that are used in the everyday running of your business are deducted as either office expenses or other expenses depending on the specific purchase. These tools often become integral parts of your business and although many of them come with accessible price tags, expensing these costs still provides a significant benefit. For example, if you pay for tools like Evernote, SEM Rush, MOZ, Hootsuite, Buffer, or Skype, and you use them solely to support the operation of your business, you’re able to deduct 100% of the subscription cost on your tax return.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.