What expense category does Amazon Web Services (AWS) fall under?

Not sure where Amazon Web Services (AWS) expenses fit in your accounts? Understanding how to categorize these costs can simplify your bookkeeping and give you better insights into your cloud computing spend.

Classifying AWS expenses

Classifying AWS expenses correctly helps you maintain accurate financial records and better manage your IT budget. AWS costs typically fall under the cloud computing or IT services expense categories. Here are some common subcategories to consider:

• Infrastructure as a service (IaaS): Costs for virtual servers and networking resources.
• Platform as a service (PaaS): Expenses related to development and deployment environments.
• Software as a service (SaaS): Charges for fully managed software applications.
• Data storage and management: Fees for services like Amazon S3 and database management.
• IT infrastructure software: Costs associated with running and maintaining your IT systems.

Examples of AWS expenses

To give you a better idea, here are some examples of AWS expenses your business might encounter:

• Amazon EC2 instances: Costs for virtual servers used to run your applications.
• Amazon RDS: Fees for managed database services.
• Amazon S3 storage: Charges for storing data in the cloud.
• AWS Lambda: Expenses for running code without managing servers.
• Amazon CloudFront: Costs for content delivery network services.

For example, if you spend $500 per month on Amazon EC2 instances to host your web applications, you would categorize this under infrastructure as a service (IaaS) expense or a cloud computing services expense.

Tax implications of AWS expenses

Understanding the tax implications of your AWS expenses can help you get the most out of your deductions. Here are some key points to consider:

• Operating expenses (OpEx): Most AWS costs are considered operating expenses, which are fully deductible in the year they are incurred.
• Capital expenses (CapEx): Certain long-term commitments like Reserved Instances might be treated as capital expenses, subject to depreciation over time.

Keep detailed records of all AWS expenses, including invoices and receipts, to support your deductions. Tax laws can vary, so it's a good idea to consult with a tax professional to ensure you're categorizing and deducting these expenses correctly. Recording AWS expenses accurately can help you make the most of tax benefits and stay compliant.

Let Ramp automate your expense process

Managing AWS expenses doesn't have to be a hassle. Ramp can automate the categorization and tracking of your AWS costs, giving you real-time insights and simplifying your expense management. With Ramp, you can focus on growing your business while we handle the details of your cloud expense tracking.