"Of course they are," you might be thinking. Actually, though, the tax treatment of website development costs - software, webpage design, and consulting services - is complex. While certain costs may be deductible in the year incurred, others may have to be "capitalized" and deducted in increments over a multi-year period. To help in the analysis, business should be prepared to answer questions like these:

If a web designer creates a relatively simple informational site using a template-driven program, the related design costs typically are capitalized and deducted ratably over their economically useful life. On the other hand, if a programmer has to manually create code using a sophisticated program language, as might be the case for a sophisticated e-commerce site, the project consists of software development. A business typically can deduct the costs as incurred or capitalize the costs and deduct them over a three-year period.

A current-year deduction is not available for software "purchased" from a contractor who assumes the risk of development. So, for example, if a contract calls for payment to be rendered when each deliverable if functioning properly, the contractor is at risk and the business generally must capitalize the costs and deduct them over three years.

Website costs incurred by a startup company before it begins active operations may fall in the "start-up expenses" category. A business generally may elect to deduct up to $5,000 of start-up expenses in the first year of operations. The remaining costs must be capitalized and deducted ratably over a 15-year period.

These are just a few of the questions which may be relevant to your company's website project. Note also that certain issues - such as which website costs constitute currently deductible advertising - have yet to be definitively resolved. Review your situation with your accountant.