Can i capitalize website development costs

Thus, within 2 — 5 years of the initial implementation of a website, most organizations have their decaying websites redesigned, rebuilt, and given a complete make-over that leaves the site looking nothing like the original site.

The old site is now dead. Our clients typically use 3 — 5 years as a standard however we always recommend considering the actual useful life of your website. Please contact us to discuss any questions or unique scenarios that you may have. Now that useful life has been discussed, let us examine capitalizable costs. The only costs for computer website developed or obtained for internal use that shall be capitalized include:.

The interest costs incurred should be recognized over the capitalization period. Once all three parts are occurring, the capitalization period begins and will continue until the three conditions are no longer present. Capitalization of costs see interest costs capitalization above begins when the preliminary project stage is complete AND management with proper authority implicitly or explicitly authorizes and commits to funding the project and that it is at least probable that the project will be completed and will be used as intended.

Whether software and website development costs are treated as intangible or tangible assets, the deemed cost can be either the fair value on transition date, or a previous GAAP revaluation at the revaluation date. Additionally the general transitional procedures in FRS require the reclassification at the date of transition of items that were recognised under previous GAAP as one type of asset ie tangible or intangible or liability but are a different type of asset or liability under FRS We have already seen what FRS 10 has to say about software.

Under the current rules of FRS 10, internally generated assets cannot be capitalised, unless there is a readily ascertainable market value, which in practice would be rarely, if ever. But internally generated software is excluded from this general rule, which makes it clear that such costs, if appropriate, should be capitalised and treated as a tangible fixed asset. Under FRS , there will be greater scrutiny of Intangible assets, certain software costs will be reclassified from tangible fixed assets to intangible fixed assets, leading to possible acceleration of tax relief through accounting amortisation of these software that will fall within the intangibles assets regime instead of the capital allowances regime.

There are five stages of developing a website. The following table summarizes how costs incurred at each stage are accounted for:. All costs. Costs for software employed to integrate a database with a website.

A more conservative approach would be to capitalize the costs of internally developed software. Then you would depreciate them over 36 months under Sec. Some companies take the easy way out. They hire third parties to set up and run their websites. Payments to such third parties should be currently deductible as ordinary and necessary business expenses.

Above this amount, you must capitalize some or all of your start-up expenses and amortize them over 60 months, starting with the month that business commences. Important: Start-up expenses can include website development costs. Until the IRS issues specific guidance on deducting vs.