When it comes to website hosting costs, the IRS has not issued any formal guidance. However, these costs are generally considered fees and subscriptions, meaning they are deductible on your return. Across all industries, the costs associated with acquiring, designing, maintaining, and marketing a website are common business expenses. Web costs can include development, programming, domain fees, hosting, and analysis.
While many of these costs are deductible, the IRS treats certain website expenses differently. Generally speaking, money spent on development may need to be capitalized and deducted over a period of years, while money spent on operation and maintenance can be deducted in the year it is incurred. Other costs related to the website are simply treated as normal business expenses and can be deducted when they are incurred. For example, you could deduct the cost of a photo shoot that will promote a new product on your website as an advertising expense.
Additionally, you can deduct 100% of regular business expenses for tax purposes. These costs include format changes, such as fonts or colors, content updates, and minor additions to the website. When it comes to web hosting, this is technically a utility expense but since it supports your online marketing efforts it could be considered a marketing expense. It is important to note that the amount of information available on the Internet about appropriate treatment is difficult to find and until now there has not been a detailed or coherent method for this type of business.
On the other hand, you would not claim an expense such as accommodation or renewal fees as advertising content since they are considered normal business expenses.