Should software costs be capitalized for tax purposes?
As software engineers and business owners alike know, understanding tax laws and regulations can be a daunting task. One of the most critical aspects of taxation is determining how to treat costs associated with software development. While there are various approaches to handling these costs, one method that has gained popularity among software developers is the capitalized cost approach.
Capitalized Cost Approach (CCA)
The capitalized cost approach is a method of valuing an asset by adding up all its costs over its useful life. In the context of software development, the CCA refers to the total cost of developing and maintaining the software over its expected lifetime.This includes direct and indirect costs such as personnel salaries, equipment and software expenses, facility costs, and r...