I am a small business owner, and I am spending about $25,000 this year for custom software development. I've never done this before, and I don't know whether it is better for tax purposes to expense this cost or capitalize it?
It is a judgment call on your part. If you income thissoftware development costs year is going to be small and you expect future years to be big, it would be better to depreciate or amortize the asset against income at a high tax rate. If you feel you need the write-off now, you can take it if you want to.
It depends how many other operating capitalizatsoftware development costsion costs you have and how that measures up against your total income. if you haven't already found a vendor, you might want to take a more cautious approach to building out your software using a prototype first.. prove out the concept and then harden it.
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