Is a Website a Capital Expense?

Website planning and maintenance costs are considered an expense, meaning they can be deducted from your earnings and tax bill. The creation of the website, however, is included in the balance sheet as a capital expenditure. This includes all the cost of web and software development, graphic design and content development. On the other hand, operational costs such as hosting, ongoing maintenance and annual domain renewal fees are expenses incurred.

In order to determine whether website design is a capital expense or a revenue expense, it is important to understand the terms. Generally accepted accounting principles of the U. S. state that the cost incurred for creating, designing, developing and programming a website will be treated as a capital asset.

This also includes the time when the company can purchase all the hardware needed to support the website. These purchases will follow existing capitalization policies, will be included in the balance sheet and amortized. When it comes to starting and running a business, it can be difficult to determine whether certain costs should be capitalized or spent. It is important to understand the difference between capital expenses and revenue expenses in order to make informed decisions about your business.