Here are a dozen expenses domainers should consider when filing taxes.
It’s 1099 season, when domain parking companies send a flurry of 1099s to U.S. unincorporated taxpayers informing them how much they paid them in 2008.
Although it’s not fun paying the associated federal income taxes (and self-employment tax), here are some expenses you can likely deduct from your revenue this year if you have proper documentation. Don’t leave any stone unturned.
1. Domain conferences – don’t forget to add up the cost of admission, hotel, airfare, and ground transportation. Mileage to the airport in your personal car may be deductible, too.
2. Annual domain registrations
3. Internet access – if you use your home internet access for business, you can expense a portion of it.
4. Home office – have a room (or area) in your house that you use almost exclusively for domaining? Talk to your accountant about taking a home office deduction (which may include a portion of your utilities). There are depreciation consequences for taking this deduction.
5. Mobile phone – a lot of domain transactions take place on the phone. If you use your mobile phone for business, you may be able to expense a portion of it.
6. Domain software – don’t forget to expense purchases of software related to your domains. Depending on the cost, you may choose to amortize it.
7. Domain services – subscribe to DomainTools, keyword finders, or other recurring services? Don’t forget to tally them up. Magazine subscriptions related to your business count, too.
8. Web hosting – My web hosting bill is about $400 a month. You certainly don’t want to miss that.
9. Advertising – if you paid to promote your domains on Google Adwords or bought ads on great domain sites like Domain Name Wire, you can deduct this expense.
10. Meals and Entertainment – did you go to a business lunch with someone? 50% of these expenses can be deducted.
11. Legal expenses – hopefully you didn’t face a UDRP challenge this year. But don’t overlook your legal expenses.
12. Office supplies – even if you don’t have an “office” per se, you may use various supplies in running your domain business. Think paper, printer ink, envelopes, etc.
Note: Of course you should discuss any expense with your tax accountant before including it on your tax return.
poor domainer says
wow. $ 400 hosting
Tony K says
as far as writing off registrations and hosting, do you print out and save every invoice on every domain you register and renew as well as monthly hosting invoices?
Andrew Allemann says
@ Poor – dedicated server
@ Tony – nah, you can always get copies if you get audited. Credit card records should suffice.
Patrick McDermott says
Deduction #13:
The GoDaddy Girl Calendar 🙂
Tony K says
Stupid question, but come tax time, how do figure out how much you spent on say domains for the previous year?
Do you have any tips on keeping track of it all.
Tony K says
And how would you classify domains and hosting – professional services? utilities? other expenses?
I did this last year with my google adsense income and tried to write-off my hosting but i don’t think my accountant did it right.
Too Many Secrets says
Andrew,
13. Move to the Bahamas so you don’t have to pay taxes !
– Richard
Andrew Allemann says
@ tony K – I track everything in Quickbooks throughout the year. I do a separate line item for web hosting and domain registration.
Andrew Allemann says
@ Too Many Secrets – it crosses your mind, but not as enjoyable of a move as it probably sounds like. I love being here in the good’ole USE
Val Lynn says
I also have one line item for hosting and another line item for domain purchases and renewals.
My question is, how do you expense them?
Are they an “Advertising and Promotion” expense, a “Computer and Internet” expense, are web developer’s charges applicable to the “Professional Fees” expenses?
Thank you!
Andrew Allemann says
Val – you can use your own line items..you don’t need to fit them into computer & internet or professional fees.
Val Lynn says
Andrew,
Thank you. Each of these domaining expenses and web development expenses maps to a tax line.
My question is, what tax line do domain purchases and hosting (separately?) map to?
Is the purchase of a domain and subsequent web development fees considered an Advertising Expense and therefore a Deduction?
Or, is the development of a website, especially a website specifically for a web development or hosting company, considered a Cost of Goods Sold (cost of labor)?
Andrew Allemann says
@ Val – I’m not sure on those. If it’s just an expense, though, you can make up your own lines and put those on your tax return. For example, I have my own line item on my tax return for Domain Registration instead of putting it as an Advertising Expense.
Oscar says
I saw this referenced on [deleted] and don’t see what the hoo hah is all about. Domains are just like any other collectible item. They are no different than a stamp collection, coin collection or baseball card collection. You can sell them, donate them, lease them out or have them stolen.
kevin says
If I win a domain in an auction or purchase a premium domain, can this Whole cost be deducted?
Rajat Kpaoor says
ASCII domains and domaining, the Chinese registrar channel, and social/cultural characteristics which impact domain companies and domainers. And so China Boot Camp was born.