When to capitalise website costs?

When to capitalise website costs?Capitalize website costs when building substantial new functionality or acquiring a distinct asset, but expense routine updates, content changes, and minor tweaks. In Canada, CRA guidance under ITA allows capitalization for development-stage costs that create enduring value beyond the current fiscal year.AnswerCapitalize website development costs when you're creating a new site from scratch, adding major functionality like e-commerce systems or customer portals, or undertaking significant redesigns that fundamentally change the site's capabilities. Expense everything else—content updates, bug fixes, hosting fees, domain renewals, and incremental design tweaks.CRA follows the principle that costs creating enduring benefit get capitalized as intangible assets and amortized over their useful life, typically 3–5 years for websites. Development-stage costs qualify: design mockups, backend programming, database architecture, custom integrations. Planning-stage costs like initial strategy sessions and vendor selection generally get expensed. Post-launch operating costs always expense immediately.The threshold matters. A $2,000 WordPress theme swap gets expensed. A $40,000 custom build with membership features, payment processing, and API connections gets capitalized. The test is whether you're acquiring a distinct asset versus maintaining an existing one. If you're improving functionality that generates revenue for multiple years, capitalize. If you're keeping the lights on, expense.Watch the grey zone: significant redesigns that don't add functionality. A visual refresh using the same CMS and features typically expenses, but rebuilding the entire front-end on a new framework while keeping the same features could argue either way. Document your reasoning.At Ottawa SEO, we track projects in phases. Discovery and strategy expense immediately. Design and build that create the actual asset capitalize. Launch support and first 30 days of fixes usually capitalize as part of the project. Ongoing SEO, content updates, and hosting always expense monthly. We recommend clients discuss their specific situation with their accountant before fiscal year-end, especially for projects spanning multiple quarters. The difference between $50,000 expensed versus capitalized dramatically affects your current-year taxable income, and CRA does review these classifications on audit.