Ouch. IRS says some Domain Purchases not Deductible

3 replies
Assume you're on Flippa and buy a $10,000 domain and website to use in your online business to make money from.

Can you deduct the $10,000 as a business expense?

Maybe not - story here.

The IRS is saying since a domain is an intangible asset it requires amortization of the cost over 15 years.

What's the impact?

If you're in the 25% tax bracket a $10,000 deduction immediately saves you $2500 in taxes. If you amortize over 15 years that is a $667 yearly deduction and only $167 per year in tax savings.

There is a de minimis rule so this issue should not apply to domain purchases of $5000 or less.

Bottom line: don't be casually making big domain purchases without considering the tax implications in your business plan.

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#deductible #domain #irs #ouch #purchases
  • Profile picture of the author JohnMcCabe
    Originally Posted by kindsvater View Post

    Bottom line: don't be casually making big domain purchases without considering the tax implications in your business plan.

    .
    Change the word "domain" from the above to "business", and it's even better advice...
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  • Profile picture of the author BradVert2013
    This is definitely something to talk to a certified accountant about. They can be worth their weight in gold when advising on stuff like this.
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  • Profile picture of the author Frank Donovan
    Makes sense. A domain purchase of that kind is like buying a store or any other offline business premises.

    Depending on the type of business you have, there might be more tax-efficient ways of incorporating the website into an existing business.
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