Are Website Costs Tax Deductible? Section 179 and Startup Rules

Yes, website costs are tax deductible when the site is used in a trade or business, but how you deduct them depends on what you spent the money on. Routine operating costs come off your income in the year you pay them. Building or overhauling a site follows one set of rules, buying software follows another, and grabbing a premium domain on the secondary market follows a third. The One Big Beautiful Bill Act, signed in 2025, reshuffled several of these rules for the 2026 tax year, generally in the taxpayer’s favor.

Running Costs You Deduct in Full Each Year

The money you spend keeping a website live is the easiest category. These qualify as ordinary and necessary business expenses under Section 162, which means you deduct the full amount in the tax year you pay it.¹ No amortization schedule, no depreciation, just a straight write-off.

Costs that fall into this bucket include:

Hosting fees, monthly or annual.
Renewal of a domain name you already own.
SaaS subscriptions: content management platforms, email marketing tools, analytics, security monitoring.
Routine maintenance: bug fixes, security patches, content updates, small design tweaks.

The line here is between maintaining what you already have and creating something new. Swapping out product photos or patching a plugin keeps the existing asset working. If the site primarily promotes the business, the content costs generally qualify as advertising expenses under the same Section 162 framework. Sole proprietors report these on Schedule C; corporations use their applicable business return.

Building or Substantially Improving the Site

This is where the 2026 rules look very different from the last few years. From 2022 through 2025, businesses had to capitalize and amortize domestic software development costs over five years. The OBBBA reversed that with a new Section 174A, which permanently restores immediate expensing for domestic research and experimental expenditures, including software development, for tax years beginning after December 31, 2024.²

Software development is specifically classified as a research or experimental expenditure under Section 174(c)(3), and that classification carries into 174A. In practical terms, if you hire a U.S.-based developer to build a custom website, create a web application, or significantly overhaul the underlying code, you can deduct the full cost in the year you pay it. The same applies when your own employees do the work. Planning, designing, coding, testing, and deploying new or substantially improved functionality all count.

There’s a major caveat. The development has to be domestic. If you outsource to contractors or teams located outside the United States, those costs still fall under the old Section 174 rule: capitalized and amortized over 15 years, starting at the midpoint of the tax year the expense is incurred.² If you use a mixed team, tracking where each hour of work happens is worth the effort. The gap between an immediate deduction and a 15-year one is that big.

Buying Existing Software for the Site

Not every website cost involves custom development. When you buy existing software from a third party, such as a pre-built e-commerce platform license, a commercial CMS, or a proprietary plugin, the default recovery method is straight-line amortization over 36 months from the date the software is placed in service.³ IRS Revenue Procedure 2000-50 reinforces this treatment for separately stated software acquisition costs.⁴ The 36-month clock starts when you actually begin using the software, not when you pay for it. Buy a license in October, deploy it in January, and January is when amortization begins.

Two elections let you skip the three-year schedule if you’d rather deduct the cost faster.

Section 179

Section 179 lets you deduct the full cost of qualifying property in the year you acquire it. Off-the-shelf computer software is explicitly included.⁵ For 2026, the maximum deduction is $2,560,000, with a phase-out beginning once total qualifying property placed in service exceeds $4,090,000. Both thresholds comfortably cover any normal website project.

Two limitations apply. The software has to be used for business more than half the time, so a personal blog with no profit motive doesn’t qualify. And your Section 179 deduction for the year cannot exceed your total taxable income from active trades or businesses.⁵ If the business runs at a net loss for the year, Section 179 can’t deepen that loss. Disallowed amounts carry forward to future tax years, so the deduction is delayed rather than lost.

100% Bonus Depreciation

The OBBBA also permanently reinstated 100% first-year bonus depreciation for qualified property acquired after January 19, 2025. Bonus depreciation had been phasing down under the Tax Cuts and Jobs Act and would have dropped to just 20% for property placed in service in 2026 without the new law. The restoration applies to new and used tangible personal property with a recovery period of 20 years or less.

Unlike Section 179, bonus depreciation has no taxable income limitation and no annual dollar cap. For most small website projects the two paths reach the same result, but if you’re investing heavily during a thin-profit year, bonus depreciation is the more flexible route.

Buying a Premium Domain Name

Renewing a domain you already own is a simple annual expense, as noted above. Buying an existing domain name from someone else is a different animal. The IRS treats this as acquiring an intangible asset that must be capitalized.⁶

How you recover that cost depends on what the domain represents. A domain that functions as a trademark or brand identifier, or one that comes with an existing website already attracting customers, typically qualifies as a Section 197 intangible and gets amortized straight-line over 15 years.⁷ A business paying $30,000 for a premium domain would deduct roughly $2,000 per year across that period. This treatment doesn’t apply to domains bought purely for resale or investment.

Website Costs Before Your Business Opens

If you build a website before the business is operating, those costs aren’t governed by the rules above. They’re startup expenditures under Section 195, which has its own framework.⁸ The OBBBA significantly expanded that benefit. For tax years beginning after December 31, 2024, you can immediately deduct up to $50,000 of startup costs in your first year of business, ten times the previous $5,000 limit.

The $50,000 deduction phases out dollar-for-dollar once total startup spending exceeds $500,000, up from $50,000 under the prior rule. At $550,000 in startup costs the immediate deduction is fully gone. Anything above the immediate deduction is amortized over 180 months, starting in the month the business begins operating.⁸ A founder who spends $40,000 building the site and other pre-launch infrastructure can now write off the entire amount in year one. Once the business opens, subsequent website spending shifts automatically into the normal operating rules.

Disabled Access Credit for Accessibility Work

Small businesses that spend money making their websites accessible to people with disabilities may qualify for a separate credit under Section 44. The credit equals 50% of eligible access expenditures above $250 and up to $10,250 in a given tax year, producing a maximum annual credit of $5,000.⁹ Because this is a credit rather than a deduction, it reduces your tax bill dollar-for-dollar.

To qualify, your business must have earned $1 million or less in gross receipts during the previous tax year, or had no more than 30 full-time employees.⁹ The credit is claimed on Form 8826 and can be taken every year you incur qualifying expenses. Screen reader compatibility, keyboard navigation, and alt text implementation all fit the profile. The credit stacks with the deduction for the underlying expense, so you get both on the same dollar.

Reporting Payments to Developers

Deducting website costs requires reporting the payments to the people you paid. If you hire an independent web developer, designer, or freelancer, anyone who isn’t your W-2 employee, you may need to file Form 1099-NEC. For the 2026 tax year, the reporting threshold is $2,000, up from the longstanding $600 floor.¹⁰ The threshold applies to payments to individuals and unincorporated businesses during the calendar year.

Missing a required 1099 doesn’t disqualify your deduction, but it invites penalties and audit attention. Collect a W-9 from any contractor before you pay them; getting it upfront is far easier than chasing it later. Payments to corporations are generally exempt from 1099 reporting, and payments processed through third-party platforms like PayPal or credit card processors have their own reporting rules.

1
Office of the Law Revision Counsel. 26 U.S. Code 162 – Trade or Business Expenses
2
Office of the Law Revision Counsel. 26 USC 174 – Amortization of Research and Experimental Expenditures
3
Office of the Law Revision Counsel. 26 USC 167 – Depreciation – Section: Treatment of Certain Property Excluded From Section 197
4
Internal Revenue Service. Rev. Proc. 2000-50 – Treatment of the Costs of Computer Software
5
Office of the Law Revision Counsel. 26 USC 179 – Election to Expense Certain Depreciable Business Assets
6
Internal Revenue Service. Treatment of Costs to Acquire Internet Domain Names for Use in Taxpayer’s Trade or Business
7
Office of the Law Revision Counsel. 26 USC 197 – Amortization of Goodwill and Certain Other Intangibles
8
Office of the Law Revision Counsel. 26 U.S. Code 195 – Start-up Expenditures
9
Office of the Law Revision Counsel. 26 U.S. Code 44 – Expenditures to Provide Access to Disabled Individuals
10
Internal Revenue Service. Publication 1099 (2026), General Instructions for Certain Information Returns