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TL;DR

Website expenses are generally deductible as ordinary and necessary business expenses, provided they are directly related to the operation of the business.

Detailed Answer

Website costs can be deducted if they are ordinary and necessary expenses for running a business. This includes costs for domain registration, hosting, design, and maintenance. Initial costs for website development can be capitalized and amortized over three years, while ongoing maintenance and updates can be deducted as current expenses. If a website is used for both personal and business purposes, only the business portion is deductible. For instance, a freelance graphic designer can deduct the full cost of a website used solely for showcasing their portfolio and attracting clients.

Where to Put It on the Tax Form

Schedule C, Line 8 (Advertising) or Line 27a (Other Expenses) for sole proprietors. For corporations, it may be included in 'Other Deductions' on Form 1120.

Real World Example

A freelance graphic designer spends $500 on a new website design and $100 annually on hosting. The $500 can be amortized over three years, while the $100 hosting fee is deducted in the year paid. This helps reduce taxable income by reflecting the cost of maintaining an online portfolio.

Audit Risk & Documentation Tips

Audit risk is moderate. Taxpayers should keep invoices, contracts, and payment records for all website-related expenses. Document the business purpose of the website and maintain records of any personal use to substantiate the business-use percentage if applicable.

IRS Reference

IRS Publication 535, Business Expenses; IRS Publication 946, How to Depreciate Property.

Relevant Industries

FreelancersConsultantsE-commerceSmall Business OwnersDigital Marketers

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Disclaimer: This is for informational purposes only and should not be construed as tax or legal advice. Always consult your tax advisor.

Page created on February 6, 2026

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