Deducting Business Tax Preparation Fees as a Business Owner or Self-Employed Person
If you own a business or are self-employed, you can deduct the cost of preparing your taxes as a business expense. The IRS considers these fees "ordinary and necessary" for running a business. If you are a sole proprietor or statutory employee (an independent contractor under common law rules), you can claim these fees on Schedule C.
You can deduct fees for tax software or professional accounting services, but only if you meet the following conditions:
You file a Schedule C as a sole proprietor or independent contractor
You file a Schedule F as a farmer
You file a Schedule E as a landlord or someone earning income from royalties
Other eligible workers include:
Rideshare drivers or food delivery drivers
Full-time commission-based sales professionals
Life insurance sales agents
How Much of the Tax Preparation Fees Can Be Deducted?
You may not be able to deduct all your tax preparation fees. The IRS allows you to deduct costs related to:
Tax software
E-filing fees (including credit card fees)
Accountant or tax preparer fees, including meetings and tax preparation
Only the portion of the fees related to preparing the business part of your taxes (Schedules C, E, or F) is deductible. Personal deductions and credits are not included in this deduction.
How to Claim the Deduction
You can deduct tax preparation fees in the year you pay them. So, if you pay to have your 2023 taxes prepared in 2024, you take the deduction for the 2024 tax year.
Schedule C: Tax preparation fees go under "legal and professional services" on Line 17, Part II.
Schedule F: Fees are listed as "other expenses" on Line 32. Be sure to break down what each expense was for.
Schedule E: You can only deduct the cost of preparing the business-related parts of your tax return.
If you use a rental property personally, you need to figure out what percentage of the preparation fees is business-related. For example, you can deduct all expenses if you used the property for personal reasons for 14 days or less or for less than 10% of the time it was rented out.
State Tax Returns
You can also deduct business-related tax preparation fees on your state tax return. It’s a good idea to consult a tax professional for details about your state's rules.
Why Work With an Accountant?
Even though some business tax prep fees aren’t fully deductible, working with an accountant can still be helpful. They may find additional deductions, credits, or benefits that lower your tax bill and ensure your return is filed correctly and on time.
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