Many entrepreneurs subscribe to online services or purchase software to support project management, accounting, and marketing activities, to name a few. Microsoft Office, Hurdlr, Podio, ZenDesk, Harvest, and Adobe CS all could be considered software or online service subscriptions. Since these platforms are often critical to operations, they are generally fully deductible.
Ian is a web designer with three employees. To keep track of the hours his employees work on each website project, he pays $32 per month for a Harvest subscription. At the end of the year, Ian's Schedule C deduction would be $384 ($32 x 12), more if he paid other subscription fees as well.
Ted is an Uber driver who uses Hurdlr to track his rideshare business's revenues, expenses and mileage in real time. When Ted files his taxes, he can deduct the cost of the Hurdlr app on his Schedule C.
Mrs. Oyster is a speaker and author who writes and talks about politics and the economy. She recently purchased a computer that came with Microsoft Office already installed. Rather than deduct the cost of Microsoft Office, Mrs. Oyster would include it as part of her basis in the computer and depreciate the software cost along with the computer. If Mrs. Oyster had instead purchased her Microsoft Office package as an add on she would depreciate the software over 36 months since the software has a useful life of more than one year.
Adel owns and manages a long-term rental property down the street from her primary residence. Recently, Adel purchased an off the shelf Microsoft Excel add in program to help her crunch the numbers to set her new rental rate. Since the software is related to her rental activities and it has a useful life of less than one year, she can deduct its full cost on line 19 of her Schedule E.
