When are Tax Preparation Fees Deductible?
When preparing your taxes, it’s common to wonder: Are tax preparation fees deductible? Whether you're a small business owner, self-employed, or simply looking for ways to offset costs, knowing what you can write off can help you maximize deductions and reduce your overall tax liability.
Join our Raleigh CPAs from C.E. Thorn, CPA, PLLC, as we explain when tax prep fees are deductible—and when they're not—based on your unique tax filing situation.
Table of Contents
Can You Write Off Tax Prep Fees?
Tax preparation costs can add up quickly—especially for small business owners or self-employed individuals paying hundreds of dollars for software or CPA services. Naturally, many wonder: Is the cost of tax preparation deductible? The answer depends on the nature of your income and which forms you're filing.
Individuals Filing Personal Tax Returns
Most individuals cannot deduct personal tax preparation fees on their federal returns. This includes accountant fees if you're filing a personal tax return (such as Form 1040) as a W-2 employee with no self-employment income. Additionally, tax preparation fees related to the cost of working with a tax professional, using tax software, or paying e-filing fees for your personal return do not qualify for tax deductions.
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 small business, you likely qualify to deduct your business tax preparation fees. These costs are considered ordinary and necessary deductible expenses for business. To qualify, your tax preparation fees must be directly related to preparing your business return—not your entire tax return. Be sure to separate business income and personal costs when calculating your itemized deductions.
When Are Tax Preparation Fees Tax Deductible for Business Owners?
If you’re self-employed or a small business owner, you can deduct tax preparation costs that relate to your business. These are considered ordinary and necessary business expenses and should be claimed accordingly. So, when are tax preparation fees deductible for business owners?
You may claim a tax prep deduction on business tax returns for:
- Fees for handling business tax issues with the IRS
- Fees paid to a CPA or small business accountant to prepare business tax forms (like Schedule C or Schedule F)
- Tax software used to prepare business returns
- E-filing or electronic payment processing fees for business filings
Where Can You Claim Tax Preparation Fees on Business Returns
Below are the form schedules where CPA fees for business deductions are filed.
| Tax Form | Who Uses It | Where to Deduct Fees |
|---|---|---|
| Schedule C | Sole proprietors, independent contractors | Line 17 – Legal and Professional Services |
| Schedule E | Rental property owners, royalty earners | Deduct business-related prep fees only |
| Schedule F | Farmers | Line 32 – Other Expenses |
Who Can Still Deduct Tax Prep Fees in 2025?
You may still qualify for the tax prep fee deduction if you're:
- A sole proprietor reporting on Schedule C
- A statutory employee (like certain life insurance agents or commission-based salespeople)
- A landlord or royalty earner using Schedule E
- A farmer using Schedule F
- A ride share or delivery driver with self-employment income
- An independent contractor with 1099 income
In these cases, the deduction applies only to the business portion of the preparation fees, not personal deductions for tax return costs.
How Much of Your Tax Preparation Fee Is Deductible?
Only the portion of fees directly related to your business return is deductible.
For example:
- If your CPA charges a flat $600 and $400 of that was for preparing Schedule C, then only $400 is deductible.
- If you prepare both personal and business taxes with tax software, you must allocate the business-related portion.
Deductible business tax preparation costs include:
- CPA or accountant fees for business filings
- Tax software costs for business tax calculations
- State tax filing fees for business returns
- Fees for resolving business-related IRS issues
Why Work With a CPA for Tax Preparation?
Even if some of your tax prep fees aren’t deductible, working with a qualified CPA can help:
- Identify eligible business deductions to lower your taxable income
- Ensure accurate and compliant tax filings
- Provide year-round tax planning to reduce future liabilities
- Assist with financial planning for growth and efficiency
Professional tax preparation services can pay for themselves by reducing errors, avoiding penalties, and identifying money-saving opportunities.
Tax Prep Fees and Deductions FAQs
Are tax preparation fees deductible for individuals?
No, accounting fees for personal tax returns are not deductible under current federal tax law.
Can I claim tax preparation fees as a small business owner?
Yes, small business owners can deduct tax prep fees related to their business return.
Can I deduct tax preparation fees on Schedule C?
Yes, business-related tax prep fees can be deducted on Line 17 of Schedule C as a legal and professional expense.
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?
Fees can be subtracted from your refund, but that method of payment doesn’t make them deductible.
Where do tax preparation fees go on 1040 form?
Personal tax prep fees do not appear anywhere on Form 1040. Only deductible business tax prep costs should be recorded on business-related schedules such as C, E, or F.
Can you claim tax prep fees on state returns?
Many states do allow deductions for business-related tax preparation fees—even when the federal return doesn’t. Be sure to check your state’s tax code or consult with a local CPA to confirm.
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
At C.E. Thorn, CPA, PLLC, we have prepared taxes for small business owners for decades. Whether you need assistance filing Schedule C, E, or F—or year-round financial support—our Raleigh CPAs are here to help. We can help you decipher and learn when are tax preparation fees deductible and proceed appropriately.
To see if we are an appropriate fit for your small business tax accounting needs, call our office today at 919-420-0092 or fill out the form below.
Contact Form
"*" indicates required fields
