Business Tax Deductions: Why Your Website Redesign Could Save You Money

Key Takeaways

• Website expenses may be tax-deductible. Costs related to design, development, content, and hosting can qualify as business tax deductions under IRS rules.
• Section 179 offers upfront savings. You may be able to deduct the full cost of certain website expenses in the year they occur.
• Ongoing website costs are typically deductible. Annual hosting, domain registration, and marketing are usually written off as ordinary business expenses.
• Redesigns often qualify for full deduction. Unlike a brand-new site build, website redesigns are more likely to be treated as one-time deductible expenses.
• Work with a tax professional. To correctly classify and maximize deductions, consult an accountant who understands IRS rules on digital expenditures.
• Time website investments strategically. Schedule projects before year-end or during high-revenue years to optimize tax benefits.
• A new website also boosts business performance. Beyond tax savings, a redesign improves SEO, user experience, and lead generation.

If your business has been holding back on initiating a website redesign due to cost concerns, know that an outdated website could cost the company money by losing leads and failing to serve as an effective brand ambassador. We previously highlighted numerous reasons why companies should consider a website revamp here. However, we neglected to note that your website redesign may offer another cost-saving benefit: Consider what if your next website upgrade could reduce your tax bill.  

That’s right, website design, development, maintenance, and related digital marketing expenses can qualify as valuable business tax deductions. Thus, when strategizing your website-related marketing efforts, keeping IRS guidelines on deductible business expenses and capital expenditures in mind is essential. In fact, by working with a tax professional, you can maximize write-offs from such expenses to significantly offset the cost of your website redesign. 

Strategic website spending isn’t just about design and effective marketing; it’s also smart business! Here’s what you need to know:        

How Website Expenses are Tax-Deductible

The U.S. tax code generally considers a business’s website-related expenses as ordinary and necessary costs that qualify for business tax deductions. Depending on expense type, website cost timing, business structure, and other factors, these expenses typically qualify as either a one-time IRS Section 179 deductible business expense that can be written off in the year incurred or as a long-term capital expenditure asset that may need to be capitalized and amortized over the website’s useful life. Annual recurring expenses, such as website hosting and domain registration fees, are generally deductible under IRS Section 162 of the Tax Code.  

What Website Costs Can You Deduct?

At this juncture, you’re probably wondering exactly what expenses you might be able to write off to reduce your tax bill. So, consider each of the following and consult with a tax professional to determine how to maximize potential deductions: 

• Website Development: The costs of hiring digital marketing experts like those at Lasso Up to design and develop your website are typically capitalized and amortized over the website’s useful life. However, in some cases, vagaries in the tax code may allow expenses to be deducted in the year incurred.
• Website Redesign and Redevelopment: More likely to be treated as a fully deductible one-time expense. 
• Hosting Fees and Maintenance: Annual hosting, domain fees, and ongoing website maintenance are usually deductible as current expenses for each tax year.
• Content Creation: Whatever you pay to incorporate content into your website can be deducted as a Section 162 expense for each tax year.  
• Marketing: Ongoing digital marketing initiatives related to your website should be deductible as advertising expenses for each tax year. This includes SEO campaigns and any related inbound marketing initiatives. 

Again, we strongly encourage you to consult with a tax professional to ensure you properly claim the correct type of tax-deductible expense and optimize its benefit to you. Note that, along with saving on taxes, a website redesign can significantly enhance business performance, especially if your current website is over three years old. 

How to Maximize Tax Savings with Your Website Investment

In addition to strategizing optimal business tax deductions with a professional tax advisor, you should take some additional steps to maximize tax savings with your website investment. For example:

• Schedule your website redesign or any other updates and maintenance to conclude before year-end, allowing you to claim any qualifying deductions in that tax year.
• Advise your digital marketing agency about any potential business tax deduction strategies, and coordinate with them and your accountant to ensure the relevant work is structured to take advantage of possible deductions.
• Plan significant website investments to coincide with tax years with higher taxable income. 
• Consider whether your business could benefit from restructuring—LLC, corporation, sole proprietorship, etc., based on different tax rules.
• Ensure that you receive and retain detailed invoices from your website developer.

Bonus: Your Website Redesign Also Boosts ROI

Remember, a website redesign or other relevant website improvements don’t just represent a tax benefit; they enhance user experience and renew your website’s SEO. This boosts user engagement, leading to more leads and conversions, and provides a new platform that may facilitate the launch of new, impactful SEO campaigns. 

How is Your Company’s Website and SEO Performance?

Overall, a website redesign is a smart investment that can yield significant returns in terms of performance and savings. To help you determine whether it might be time to revamp your company’s website, we offer a free website and SEO assessment that provides valuable insights about its current effectiveness. 

Consult Lasso Up to Invest Smarter with Your Website

Given that you may be able to write off the costs of your next website build or redesign, perhaps it’s time to consider a reboot. Your website represents a valuable revenue-generating asset that should maximize ROI through powerful SEO and other digital marketing features, as well as by taking full advantage of any business tax deductions. Contact us today for expertise in building a website that looks great, engages users, and qualifies as a smart business investment.  

FAQ: Business Tax Deductions & Website Expenses

Q: Can I deduct the cost of a new website as a business expense?

A: Yes, but it depends on how the expense is classified. New website builds are often treated as capital expenditures, meaning the cost may need to be amortized over several years. However, specific components may qualify for immediate deduction under Section 179 if they meet IRS criteria.

Q: Are website redesign costs fully deductible in the year they occur?

A: In many cases, yes. Website redesigns are typically categorized as improvements to an existing asset and may be fully deductible in the year they are incurred. Always confirm with your tax advisor to ensure proper classification.

Q: Which website-related costs qualify for business tax deductions?

A: Common deductible website expenses include:

• Design and development
• Redesign and redevelopment
• Domain and hosting fees
• Ongoing maintenance
• Content creation
• Digital marketing and SEO campaigns

Each may fall under a different IRS code (Section 162 or Section 179), so consult a professional for the best strategy.

Q: How do I know if I should amortize or deduct my website expenses?

A: It depends on the nature of the cost and how the IRS classifies it:

• Capital expenditures (like a brand-new custom site) may need to be amortized.
• Operational costs (like updates or hosting) are generally deductible annually.

Section 179 may allow for upfront deduction of some capitalized costs, depending on your business situation.

Q: Does my business structure affect what I can deduct?

A: Yes. Whether you’re a sole proprietor, LLC, or corporation, your structure impacts how deductions are reported and what limitations may apply. Speak with your CPA to tailor your deduction strategy to your business entity.

Q: When is the best time to invest in a website redesign for tax purposes?

A: To claim deductions in the current tax year, complete your website project before December 31. If you’re having a high-revenue year, timing your redesign then could also provide greater tax relief.

Q: How do I prove my website expenses to the IRS?

A: Keep clear, itemized invoices from your web developer or agency, along with contracts and statements of work. Proper documentation helps justify your deduction if the IRS ever audits your return.

*Important Disclaimer:

The information in this article is intended for general educational purposes only and should not be considered tax or legal advice. Tax rules around business deductions, including website-related expenses, can vary based on your industry, business structure, and other factors. Please consult with a licensed tax professional or accountant before making any financial decisions or filing deductions. Lasso Up is not responsible for any tax filings, errors, or liabilities that may result from the use of this content.