4 Instances When You Can Rightfully Deduct Tax Preparation Fees
When are tax preparation fees deductible? Whether you're a small business owner, self-employed, wondering about personal deductions for complex tax situations, or simply looking for ways to reduce your taxable income, understanding what qualifies as a deduction can help you avoid missed opportunities.
Join our Raleigh CPAs at C.E. Thorn, CPA, PLLC, as we explain when tax preparation costs are deductible—and when they are not— based on your tax situation.
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Can You Write Off Tax Prep Fees?
Tax preparation costs can add up quickly—especially for business owners filing multiple forms, tracking expenses, or paying for professional tax services. The good news is that some tax preparation fees may be deductible, but only if they are business-related.
Individuals Filing Personal Tax Returns
For most individuals, personal tax preparation fees are not deductible on federal returns. If you’re filing Form 1040 as a W-2 employee (with no self-employment income or business activity), you typically cannot deduct:
- CPA or accountant fees for your personal return
- Tax software costs for personal filing
- E-filing fees for a personal return
This rule stems from the Tax Cuts and Jobs Act (TCJA), which suspended miscellaneous deductions (including personal tax preparation expenses) beginning in tax year 2018. Under current federal law, that suspension is scheduled to remain in place through tax year 2025.
This change stems from the Tax Cuts and Jobs Act (TCJA), which eliminated the deduction for miscellaneous itemized expenses—including personal tax prep fees—starting in tax year 2018.
Filing As Self-Employed or a Small Business Owner
If you’re self-employed or run a business, you may be able to deduct the business portion of tax prep fees as an ordinary and necessary expense. However, an important point many taxpayers miss is that you can only deduct tax preparation fees related to your business or income-producing activity—not your full personal return.
That means your CPA invoice or software fee may need to be allocated between personal and business filing.
4 Instances When Tax Preparation Fees are Deductible
If you’re self-employed or running a small business, tax season usually involves more than filing a basic Form 1040. You may be tracking expenses, reporting income on Schedule C or Schedule F, filing state business returns, and navigating compliance requirements that don’t apply to most W-2 employees. The silver lining is that many business tax preparation fees are deductible—as long as they are directly connected to preparing business-related tax documents or managing business tax matters.
Below are the most common deductible tax-preparation expenses for business owners.
Fees for Handling Business Tax Issues With the IRS
If your CPA communicates with the IRS on behalf of your business, those costs may be legitimate deductible expenses for your business. This often includes help responding to notices, resolving business account issues, or requesting IRS transcripts. The key is that the service must relate to your business income or business filings, not personal tax matters.
Fees for Preparing Schedule C or Schedule F
Fees paid to a small business accountant are typically deductible, since they are directly tied to reporting and maintaining your business. This commonly includes preparation of Schedule C (sole proprietors and independent contractors) or Schedule F (farming income and expenses). If your CPA bills separately for business schedules versus personal filing, it’s easier to track and document the deductible portion.
Tax Filing Software and E-Filing Fees
Many small business owners pay for tax software, filing add-ons, or e-filing fees to submit business returns and schedules. When these costs relate directly to reporting business income (such as on a Schedule C) or to filing business tax forms, they may qualify as deductible expenses. If the software or platform is used for both personal and business filing, only the portion used for business should be deducted.
Fees to Respond to IRS Notices
If you receive an IRS letter or notice related to your business, such as income reporting, filing corrections, or documentation requests, professional fees to resolve it are often deductible. These situations can quickly become stressful and time-consuming, so getting help is common (and often worth it). Just be sure that the notice is connected to your business activity, not a personal tax issue.
Where Can You Claim Tax Preparation Fees on Business Returns?
Here are common places where deductible tax prep fees may appear, depending on your filing type:
| Tax Form | Who Uses It | Where Fees May Be Deducted |
| Schedule C | Sole proprietors, independent contractors | Often Line 17 – Legal and professional services |
| Schedule E | Rental property owners, royalty earners | Deductible only for the income-producing portion |
| Schedule F | Farmers | Line 32 – Other expenses |
Your CPA can help ensure the deduction is categorized correctly based on your return.
Business Entities That Can Deduct Tax Prep Fees
You may still qualify for the tax prep fee deduction if you're:
- A sole proprietorship filed on Schedule C
- A farm operation filed on Schedule F
- Rental property or royalty activity filed on Schedule E
- 1099/self-employment income (including gig work such as rideshare or delivery driving)
- A statutory employee (like certain life insurance agents or commission-based salespeople)
In each case, the deduction applies only to the portion of fees related to that income-producing activity.
Benefits of Working With Our Raleigh CPAs
For small business owners, tax preparation is about more than filing on time—it’s about staying organized and making informed financial decisions. Our Raleigh CPA team supports clients with accurate reporting, deduction guidance, and year-round accounting insight.
Tax Prep Fees and Deductions FAQs
Are tax preparation fees deductible for individuals?
No. Personal tax preparation fees are not deductible on federal returns under current law.
Can I claim tax preparation fees as a small business owner?
Yes, as long as the fees relate to business filings or business income reporting.
Can I deduct tax preparation fees on Schedule C?
Yes. Business-related tax prep fees may be deductible (commonly on Line 17).
Are tax preparation fees deductible on Schedule A?
Many taxpayers wonder: Are tax preparation fees deductible? No, personal tax prep fees are no longer deductible on Schedule A due to the Tax Cuts and Jobs Act.
Can tax preparation fees be deducted from refund?
They can be paid from your refund, but that does not make them deductible.
Where do tax preparation fees go on 1040 form?
Personal tax preparation fees do not appear on Form 1040. Deductible fees generally belong on business-related schedules such as C, E, or F.
Can you claim tax prep fees on state returns?
Some states allow deductions or adjustments related to tax preparation fees. Rules vary, so it’s best to confirm with a local CPA.
What miscellaneous itemized deductions should I include on my business tax returns?
Business tax returns don’t use the same itemized deduction rules as personal returns. However, eligible expenses can be deducted on the appropriate business schedule. These eligible expenses include tax prep fees, legal fees, and professional services related to your business.
Contact Our Raleigh CPAs for Small Business Tax Preparation
If you still need help determining when tax prepartion fees are deductible, a local CPA can help. At C.E. Thorn, CPA, PLLC, we’ve supported small business owners and self-employed individuals in maximizing deductions for decades with tax advice and business tax filings—from Schedule C and rental income filings to year-round tax planning.
If you’re a small business owner in the greater Raleigh, NC area and want help with tax preparation and ongoing accounting, C.E. Thorn, CPA, PLLC may be able to help. To see if we’re a fit for your needs, call 919-420-0092 or fill out the contact form below to get started.
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