What’s the wisest thing you can do to bring new customers to your business? One thing which most of us do is invest in web development for our online presence. Without a website, you are all but invisible to today’s customers.
However, we often waste too much on something which doesn't give significant results later on.
Hence, this article is all about understanding costs that are considered deductible. It has significant tax benefits if you know what to look for and what to reduce.
Editor’s note: Find a GoDaddy-certified web developer here by scrolling down to “Companies looking for certified GoDaddy professionals?” Just enter your details to find a web developer.
Introduction
The COVID-19 pandemic that hit the world last year has left business owners with tight budgets. However, technology has gained importance, since everyone is working from home.
2021 is about to end and this year wasn't any different. An overwhelming number of people have started using online tools and services during the pandemic and post-pandemic. Hence, businesses continue to rely on web development to improve user experience and increase business efficiency.
Therefore, 2021 can be seen as a year of innovations and technologies that will help businesses create value and increase return on investment.
However, most businesses are dealing with budget failures. So, the real catch is, investing in web development may cost you a fortune.
What do web developers do?
Website developers tell you how your business can improve its digital presence and ultimately exceed customer expectations.
When your developer teaches your marketers about the latest SEO (search engine optimisation) trends, they are better able to produce quality content that's easy to use and improves your search rankings.
Web development is a complex and time-consuming task.
That is why it is one of the many cost factors which you need to consider. If you’re a small startup, you may need to do all of the roles and learn a little more about web development.
However, if you work in a large agency and have a budget, you may need a UX (user experience) team or an entire project team for web development.
When to invest in web development
A functional and nice-looking website is essential, so consistent web development, design, and maintenance will help you keep your budget in the long run. By avoiding major technology issues on your site, you reduce future cost in terms of:
- Development
- Everyday management
- Loss of reputation due to security breaches
No one wants unnecessary costs. But if you see these three issues, it is the right time to immediately call for a web development company or hire someone to look into web development.
1. When you are losing customers
If you sell products or services on your website, you are probably tracking conversion rates and how your site is contributing to your bottom line.
Businesses cannot afford poorly-designed websites because every mistake a customer encounters may result in them clicking away. This, in turn, can take a heavy toll on overall sales.
If you are losing potential sales due to slow page loading time and other website errors, you need to invest in web development right away.
2. If website maintenance is costly
Effective websites are essential, and no one should suggest otherwise. But, when you look closely, most organizations are far from maintaining a high-performing website.
Why? There are several reasons why web development does not promote the highest performance.
Some businesses gush over a low-priced developer who takes more time to fix the website issue.
Whereas if you hire someone professional, they adopt the latest technology and repair all your site’s errors in one go. This is one of the best ways of cutting costs — hire the right person for website-related issues, rather than investing again and again.
Maintenance is often asked to provide manpower and budget to support sub-resources and projects such as web development. This depletes maintenance resources and budget, which hampers the ability to develop a top-notch site.
On average, organizations spend 30-40% of their budgets and working time on these non-core activities. If you are facing a lack of finances, time, or management support, a good web development company can help.
3. To keep up with competitors
Although the goals of your website may vary depending on your industry, one fact remains constant:
You need to stand out from what most of the companies are doing.
Quality web design and development can help you achieve this by using plug-ins and texts on the page to provide unique user experiences.
Every business competes for attention. People do extensive research on the internet before they buy anything.
If your competitors have websites and you don’t, you’re losing because you’re not visible. If you have a website that isn’t yielding any profit, it can be because it needs a major revamp.
Why is cost deduction important?
Typical web maintenance costs include:
- Updating web pages with new products or services
- Correcting small items of style or formatting
- Rectifying errors or broken links
- Making formatting changes, including size, type, and color of the character
Cost of upgrades and improvements can be categorized as maintenance costs if they cannot reasonably be distinguished.
In addition to the cost of training and maintaining the website, you will also have to spend money to create new links, analyze usage, site maintenance, and take routine backups.
As with all tax issues, you should consult with a tax advisor and provide relevant facts and circumstances to determine the appropriate treatment.
Three specific areas where you can try cost-cutting
Imagine viewers come to your website and leave with good remarks! This is right to say that you can easily express your company's values on a website.
Good tools, great videos, and lots of content are what people look for when deciding on web development.
While these things are entertaining, they increase the cost of your site and may not be what you need.
Simplifying your site can save you development time and money and help you focus on your most important goals.
So, here’s the real game, you need to understand that cost-cutting should be done on specific areas and what are these areas? Let’s find out.
1. Advertising expenses
The cost of website ad content is deducted as advertising costs. The IRS states that you can “reduce reasonable advertising costs directly related to your business.”
For tax purposes, you can deduct 100% of your advertising costs.
For example, you can deduct the cost of photographing a new product on your website as advertising costs. You can claim these deductions in the year in which the fees are paid or levied, depending on how they are collected.
On the other hand, you will not be charged for expenses such as hosting fees or renovations such as advertising content as they are part of business expenses.
2. Software and non-software expense
When you come across expenses during web development, it can be in two forms: software expenses and non-software expenses.
You need to consider hosting costs in your initial budget. Your software hosting server should bear all the costs for:
- Email servers
- Push notification servers
- Analytics servers
- Integration servers
Purchases made on sites that are not classified as programs — for example, logo design costs — are deducted during the life of the website, since they are a one-time expense.
You are probably dealing with a company that offers you a product or a SaaS (software as a service) that pays a monthly fee or hosts your website somewhere in the cloud.
There is also a monthly fee for this type of service. These costs are not only incurred after start-up but increase with growth.
It is imperative to prepare this budget in mind as there are no ongoing costs. If your servers are hosted in the cloud, you still need someone on your computer to manage those servers.
Today, it is also crucial to create, edit and manage the website content regularly. To save expense, try not to contact your developer every time you want to make small changes. Therefore, you need CMS software to perform all the above tasks smoothly, which is a one-time expense.
Here is an example of annual maintenance cost for varied kinds of websites.
Takeaway tip: This tip is very important when choosing the hosting platform for your website. Some CMS platforms like WordPress require less maintenance with respect to other online website builders, which can be expensive. So, go for the cheaper option!
3. Business expenses
Certain costs are considered regular business expenses and are deducted from the business on a day-to-day basis.
You can cut 100% of your unnecessary business expenses, which are not usual. Make an expense diary at the beginning of every month, quarter or year.
These website business costs include changes such as:
- Fonts or colors
- Content updates
- Small additions to your website
Keep in mind that the major changes, such as adding new pages to a site or adding shopping cart functionality, are not part of the normal business cost category.
So, shop every necessary software, tool, or plugin for your website in the beginning.
Investing in your online site not only gets you new customers but also provides significant tax incentives. Understanding the overhead costs to be deducted can encourage you to invest in your company’s website.
Factors to keep in mind before choosing a web developer
To find the best partner or company for web development, you need to know the basics of choosing an online development company.
Poor website development agencies are characterized by:
- Poor design and programming
- Inaccurate business solutions
- Missed deadlines
- Costly project evaluations
Working with the wrong developers can lead to poor-quality websites and a waste of time and money.
Always keep in mind that incurring costs in web development should be fruitful. Many website companies offer website plans that update customers’ websites with the latest security features.
Some agencies also offer plans with website design or feature updates to further optimize user conversion. However, the cost of maintaining websites is something to be taken care of.
Conclusion
Running a business today requires a professional website. But with budgets tight, it is important to know the monthly/annual site maintenance cost and how to do cost-cutting, ideally.
As with all tax issues, you should consult with a tax advisor and provide relevant facts and circumstances to determine the appropriate tax deductions for which you qualify.
