J.K. Lasser's Small Business Taxes 2019 by Barbara Weltman

Author:Barbara Weltman
Language: eng
Format: epub
ISBN: 9781119511533
Publisher: Wiley
Published: 2018-10-26T14:30:00+00:00

Computer Software

There are several different rules for treating the cost of software:

If it is purchased separately from the purchase of a computer (i.e., it is not bundled with the hardware), the cost can be expensed. Alternatively, if the Section 179 deduction is not elected, the cost can be amortized over 36 months. However, if the useful life of the software is less than 36 months, amortize it over its useful life. If it has a useful life of less than one year (e.g., an annual tax preparation program), deduct it in full in the year of purchase (in effect, the same write-off as expensing, but there is no taxable income limitation in this instance as there is for expensing).

If it is bundled with hardware, depreciate as part of the hardware (generally over 5 years as explained earlier in this chapter).

If it is purchased as part of the acquisition of a business, it is amortized as a Section 197 asset over 15 years.

If it is developed by you for use in your business, treat it as a research and development cost (explained later).

If it is leased, deduct the lease payments over the term of the lease as you would any other rental expense.

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