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deducting marketing expenses

Deducting Small Business Marketing Expenses

Deducting Small Business Marketing Expenses 1080 1080 Bernstein Financial Services

So much of marketing today seems to happen virtually, such as on your website, social media and teleconferencing calls. We can help you determine how to deduct marketing expenses.
Payments for leased or licensed software (e.g., Adobe Suite subscriptions) are deductible as ordinary and necessary business expenses. Are you paying a third party for software to run your website? This is commonly referred to as “software as a service.” In general, payments to third parties are currently deductible as ordinary and necessary business expenses. Website fees for hosting and maintenance and ongoing website content creation also qualify.

Hardware expenses generally fall under the standard rules for depreciable equipment.

Your software development costs are deductible research and development costs. To qualify for this treatment, the costs must be paid or incurred by December 31, 2022. Talk to us if you are developing apps or software for your business. Another conservative approach would be to capitalize the costs of internally developed software. Then you would depreciate them over 36 months.

Advertising costs are frequently deductible, but not always:

  • If your website is primarily for advertising, you can also currently deduct the costs of designing, developing, and creating your website as ordinary and necessary business expenses.
  • Costs for temporary signs are considered advertising, but costs for permanent signs (that last more than a year) are not advertising and may be depreciated as long-term assets.
  • Advertising as an indirect political contribution is not deductible.
  • The cost of placing an ad on your vehicle is deductible. Read more about what the IRS says about ads on vehicles here.   
  • Costs for help-wanted ads are a deductible business expense, but they are not considered marketing or advertising.

Marketing can become a company’s biggest expense. We recommend that you document all of the different accounts and companies you pay each month to keep track of your marketing subscriptions and fees. Set goals, track the performance of your marketing activities regularly, and eliminate the costly activities that do not offer a return on the investment.

Marketing Expenses for New Businesses

You can deduct the marketing expenses your business incurs before your official launch date in two ways!

  • The IRS considers a start-up expense deductible if it’s a cost you incur before the day your business begins. Deduct the expense of hiring a public relations agency to help prepare a press release, a developer to create a website, or a designer to create business cards to help you make a splash when your business begins.
  • Under the 100% first-year bonus depreciation break, once tangible assets are up and running, you can deduct the total cost in the first year they’re placed in service (before 2023).

Marketing Expenses You Cannot Write Off

You cannot deduct advertising expenses associated with research and development activities.  Donations to charities are not a marketing or advertising expense; however, these expenses may be deductible in other areas of your business. If you run a promotion that gives customers a discount on products or services, you may not deduct the amount of the price reduction as an expense. And of course, you may not deduct costs of personal hobbies carried on with colleagues as marketing.

Schedule an appointment with us to discuss how you can write off your digital marketing activities!