question New Tax Plan, 2017.

[mad409]

Been reading over the new tax plan proposal and it appears to me it would be beneficial to the U.S. domain industry. Currently a domain purchase should be depreciated over a number of years depending on the amount paid for the domain. The new proposal, for the next five years all depreciable assets businesses can expense the cost.

"The Tax Act allows all businesses to expense the cost of depreciable assets instead of writing them off over the years. It does not apply to structures. This feature expires in five years. Trump promised U.S.-based manufacturers they could deduct all expenses for new plants and equipment. The write-off would encourage more investment."

I'm not a tax person but it appears the law would not apply to structures but will include all other business assets purchased.

 

[Casey L]

I’m not certain that a domain name is currently depriciable. Depreciation tends to only apply to long term assets that lose value over time (vehicle, equipment, computers, etc), but if I’m not mistaken the domain names would fall under inventory (technically a short term asset) and not long term assets. I have always “expensed” my domain name acquisitions as cost of goods sold, which is price paid for your sellable goods being your inventory.

I believe this tax rule would only really affect domainers in that we could write off the cost of a new business laptop or cell phone the year we purchase it rather than depreciating it over a few years.

 

[enlytend]

Assets like equipment, hardware, off-the-shelf software, etc. can already be written off the year they're purchased without deprecating via a section 179 deduction. There are limitations, but they're pretty high ($500,000, I think). In some cases it may be better to deprecate (just a guess, I'm not an accountant.)
Don't know if the new proposed law would affect domains in any way - as Casey L said, they're not the kind of long-term assets that depreciate.
Specifics aren't available and anyway it would have to pass ....

 

[mad409]

I agree with the above reply as it pertains to domaining and selling of domains.

"If you buy domains with the intent to sell them later, they could be treated as inventory and expensed as cost of goods sold. Another scenario is someone who buys domains and finds ways to monetize the traffic that passes through them. Such domains are basically tools used in the generation of revenue -- assets, in other words."

But I'm looking at the proposed tax code in regards to a company purchasing a domain for their new business etc..

"A domain name can be considered an asset in several situations. If a domain name is purchased and developed into a brand identity, the IRS generally regards the money spent as capital costs that have to be depreciated over time. In this case, the value in a domain that makes it an asset is its role in brand recognition, which can result in long-term business benefit."

So back to the proposed tax law.

• Under the Trump Proposal, companies engaged in manufacturing in the United States may elect to immediately expense capital investments.

Of course this has to pass which is another huge hurdle but I think it's a benefit in regards to businesses purchasing aftermarket domains. Again I could be reading this wrong but it appears pretty clear. Admittedly I do need to do some more reading and see if his plan outlines assets better, tangible and intangible etc...

Addition: This is all I can find at this time but I'm sure this plan will change several times.

• Immediate expensing of business investments: Companies can deduct the cost of business investments from their tax bill in the year that they make them instead of spreading it out over multiple years.

 

[consumers]

Domains get amortized, not depreciated since they don't wear out. Right now if you treat them like intellectual property then it is 15 years so if you buy a domain for $15K you get to deduct $1K per year for 15 years.