Are Software and Subscriptions Tax Deductible? 2026 Guide

When it counts

Recurring subscriptions you use in the business. Design tools, accounting, cloud storage, project tools, AI assistants and similar services.
Mixed-use tools. Deduct the business share, and keep a note of how you split it.
One-time software you buy outright, like a license. Off-the-shelf software is depreciated over 36 months, but bought after January 19, 2025 it can usually be deducted in full the year you start using it, through 100% bonus depreciation or Section 179. The $2,500 safe harbor is for physical items, so it is not the route for software.
It goes on Schedule C, line 27b, other expenses.

When it doesn't

A subscription you use only personally, like a streaming service.
The personal share of a tool you use for both.
Software you bought for personal use before your business started. It is depreciated from the day you first used it for the business, without Section 179 or bonus.
A subscription you paid for before your business opened. That is a start-up cost. You can deduct up to $5,000 of start-up costs in the first year, and the rest is spread over 180 months.

A worked example

You pay $30 a month for a design tool and use it for client work about 70% of the time.

Yearly cost: $30.00 times 12 = $360.00
Business use: 70%
Your write-off: $252.00

An AI assistant you pay $20 a month for and use only for client work comes to $240.00 for the year, all of it deductible.

What records to keep

The receipts, invoices or card statements that show each charge.
What each tool is for. One sentence is enough.
A note on how you worked out your business use when a tool is shared.

Common questions

Are AI tools deductible?

Yes. A chatbot or AI assistant subscription you use in your business follows the same rules as any software subscription. If you also use it personally, split it.

When do I deduct an annual plan?

WriteOff treats a subscription as an expense in the year you pay it.

How do I deduct a software license I bought outright?

Any one-time software purchase is depreciable property, whatever it costs. Off-the-shelf software is written off over 36 months, unless 100% bonus depreciation or Section 179 lets you deduct it in the first year, which is usually the case for software bought after January 19, 2025.

Sources

IRS Publication 334, Tax Guide for Small Business: ordinary business expenses.
Instructions for Schedule C: subscription services as other expenses.
IRS Publication 946, How To Depreciate Property: software, Section 179 and bonus depreciation.
IRS Publication 583, Starting a Business and Keeping Records: start-up costs.

Also cited by the WriteOff rules: 26 U.S.C. sections 162, 195, 263 and 179, and Treas. Reg. section 1.162-1.