Are Website Costs Tax Deductible?

E commerce has taken the business world by storm. It is evident that creating a website is an ingredient to building a successful business. Learn how building your small business website can reduce your taxes.

 

It is no secret that eCommerce has become the norm. That is why it is really important for business owners to set up and maintain a functional website. While this could be costly, the cost of setting up and maintaining a website can reduce your taxes. However, it is important to distinguish between capital expenses and current expenses.

Capital expenses are those that have a lasting benefit, and are incurred for the initial development in the set up of a website. This would include hardware and the cost paid to the web developer. Capital Cost Allowance or depreciation is claimed on hardware at an annualized rate of 55%. Whereas web development costs are amortized or depreciated over a 2 year period evenly.
Current expenses are those costs associated with the maintenance and functionality of your website. These costs include hosting fees, domain fees, updating content, and minor software updates. Unlike capital expenses, current expenses are tax deductible in the year they are incurred.

So, you may be wondering how these costs captured on a T2 corporate tax return? Well, recurring expenses, also known as, current expenses, are reported on GIFI form G125 of the T2 corporate tax return. However, costs for acquiring the hardware and building the website are reported on schedule 8 of the T2 tax return. Learn more about how to prepare a GIFI for the T2 Corporate Tax Return.

So here’s the tip!

Are website costs tax deductibles? Yes, as long as you remember to separate your current expenses from your capital expenses as they both have different treatments on your taxes.
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ABOUT THE AUTHOR

ALLAN MADAN

CPA, CA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

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