For the 2018 tax year, I'm looking to take 100% bonus depreciation on software expenses for my US (California) based LLC. While the tax code states that "Off-the-shelf computer software" is eligible property for the section 179 deduction, it's vague on what "off-the-shelf" actually means. Does the definition include software purchased online? Are there cases where it might include subscription based software (where access is provided for 1 or more years)? Does it include web apps (that run in the browser as opposed to being downloaded to local storage)? Please help clarify this for me.
In contracting Non-off-the-shelf software is software that has been modified or developed for you. Microsoft office is off the shelf. Paying a company to develop an add-on to MS office would not be off-the-shelf.
How it is delivered isn't relevant. It could be purchased from a physical store, or delivered by the post office, or downloaded.
A subscription based model would be the same, though the payment frequency would be an issue. If you pay $x per month then only those months for this year would apply for this years taxes. If there is an annual or multi-year subscription it might have to be split the same way.