Canuckbusiness

Start a business, Do your taxes, Save money

Is my website an asset or expense?

Before answering this question we need to specify what costs we are talking about. Having a website generally incurs the following costs:

  1. Site Design Services
  2. Domain Registration
  3. Ongoing Hosting
  4. Site Updates/maintenance

There are different ways to look at these, and if you were to ask two different accountants you would probably get varying responses, but generally this is what I do:

Site Design Services
You kick out $2,000 to have someone design and put up a site for you. You plan to use this site for more than a year, so it is definitely a capital asset. You need to amortize this (depreciate its cost over a number of years). Usually, I would put it in Class 8 (20% deduction per year).

Domain Registration
You “buy” a domain name. Usually this is a paltry amount ($10-$20 per year) that you have to pay every year or two. I would just put this under Advertising Expenses. However, if you paid more than $400 for this name (because someone knew you were going to need it and beat you to it, then sold it to you) you will need to capitalize it under “licenses” or classify it as an “eligible capital expenditure”. Talk to your accountant if this is the case.

Ongoing Hosting Fees
Add up the amount you pay during the year and put it in Advertising Expenses.

Site Updates/maintenance
I’m going to summon up my Magic Rule #1 to help me here. If you pay less than $400 to have someone work on your site during the year, put it in Advertising Expenses. If you have the entire site revamped and have to pay more, then add it to Class 8 (or whatever class you originally put the website under).

October 20, 2011 - Posted by | Random Questions, Running Your Business

8 Comments »

  1. What if I contract out to a company that continues to redesign and do programming updates for my website, throughout the year?

    Since it costs over $1000 a month, are there any other options other than the Class 8 (20%)?

    Thanks for all the great tips.

    Comment by Eric | April 27, 2012 | Reply

    • Hi Eric,

      I think in your case you would be able to capitalize the first-time set-up and construction of your website under Class 8, but the amounts ($1,000+) that you spend each month you could write off as an expense (meaning you would get a 100% deduction in the year). If you are spending that amount every month, you could definitely argue it is more a “Maintenance & Repairs” expense type of situation. You could also put it in the “Management & Administration” category, or some other expense category you feel fits better. Just be consistent. Good luck and thanks for stopping by!
      jk

      Comment by jkswift | April 27, 2012 | Reply

  2. Hello James!
    Can you answer my questions? 🙂
    How should I file domain registration fees, if I paid for 10 years in advance?
    Thank you

    Comment by Igor | April 15, 2013 | Reply

    • Hi Igor,

      The purists out there will tell you that you should capitalize the amount and depreciate it year over year. But because it is a trivial amount (less than $400 I imagine) I would just put the full amount in Advertising expenses or Office expenses and get on with my life. Thanks for stopping by!
      james

      Comment by -- | April 15, 2013 | Reply

      • Thank you, James! Yes, it’s less then $400. What is the magic number, btw? 🙂
        Also, I was speaking to a CRA agent, I forgot to ask her about 10 years domain registration, but I asked, if I could file this as “Advertising” and she told me “no”.
        As she said, it should be filed under “Other” (not much difference for deduction), because advertising should be in Canadian newspapers and TV. Guess, it will be interested to know for you.

        Comment by Igor | April 16, 2013

      • Call next week and talk to a different agent and you’ll get a different answer. Never put ANYTHING under “other” if you can avoid it. The expense category makes no difference to your net income (only if you capitalize something will it have an impact).
        Good luck!

        Comment by -- | April 16, 2013

  3. Hi,
    Over the past year I purchased quite a few domain names, and made some SEO and other website development purchases and expenses towards them. Some sites did not work out in the beginning, but I finally did well with one site and made a profit selling consulting services.
    The other websites I do not intend on continuing to maintain, or renew their domains. I also stopped the consulting services as I no longer have time. I plan on letting all the registrations lapse this year when they are up. Would you suggest these expenses could be current expenses, or capital expenditure?
    Thanks.

    Comment by Jeff G | April 29, 2013 | Reply

    • I would try to put them all in as current expenses somewhere.

      Comment by -- | April 29, 2013 | Reply


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