When tax season rolls around, many taxpayers wonder if they can deduct the fees they pay to have their taxes prepared. The short answer is yes, you can write off tax preparation fees under certain conditions. However, there are specific rules and restrictions that apply.
The IRS allows you to deduct tax preparation fees as a miscellaneous deduction on Schedule A of your tax return. These fees are considered a miscellaneous itemized deduction subject to the 2% AGI (Adjusted Gross Income) limit. This means you can only deduct the portion of your miscellaneous expenses that exceed 2% of your AGI.
Tax preparation fees, along with other miscellaneous deductions such as unreimbursed employee expenses, investment expenses, and certain legal fees, fall under this category. While these deductions can add up, they are only beneficial if your total itemized deductions exceed the standard deduction.
It’s important to keep in mind that the Tax Cuts and Jobs Act of 2017 suspended the miscellaneous itemized deduction for tax years 2018 through 2025. This means that for these years, you cannot deduct tax preparation fees or other miscellaneous expenses on your federal tax return. However, some states may still allow these deductions on your state tax return.
If you are filing your taxes for tax years before 2018 or after 2025, you may be eligible to deduct tax preparation fees as part of your miscellaneous itemized deductions. Be sure to keep accurate records of all fees paid to prepare your taxes, including receipts or invoices from your tax preparer.
FAQs about tax preparation fees:
1. Can I deduct fees for tax software or online tax preparation services?
Yes, fees paid for tax software or online tax preparation services are considered tax preparation fees and can be deducted as part of your miscellaneous itemized deductions.
2. Can I deduct tax preparation fees if I use tax preparation software myself?
No, if you use tax preparation software yourself without paying any fees for professional assistance, you cannot deduct the cost of the software as a tax preparation fee.
3. Can I deduct tax preparation fees for business taxes?
Yes, tax preparation fees for business taxes can be deducted as a business expense on your business tax return, rather than as a miscellaneous itemized deduction on your personal tax return.
4. Can I deduct tax preparation fees if I am self-employed?
Yes, if you are self-employed, you can deduct tax preparation fees as a business expense on your Schedule C, rather than as a miscellaneous itemized deduction on your personal tax return.
5. Can I deduct tax preparation fees if I am an employee?
If you are an employee, you may be able to deduct tax preparation fees as an unreimbursed employee expense on Schedule A, subject to the 2% AGI limit.
6. Can I deduct tax preparation fees for multiple years at once?
No, you can only deduct tax preparation fees for the tax year in which they were paid. You cannot prepay fees for future years and deduct them all at once.
7. Can I deduct tax preparation fees for my spouse’s return?
Yes, you can deduct tax preparation fees for your spouse’s return as long as you are filing a joint return.
8. Can I deduct tax preparation fees for my child’s return?
No, you cannot deduct tax preparation fees for your child’s return unless you are claiming their income on your own tax return.
9. Can I deduct tax preparation fees if I have a simple tax return?
Yes, even if you have a simple tax return, you can still deduct tax preparation fees as a miscellaneous itemized deduction if you choose to itemize your deductions.
10. Can I deduct tax preparation fees if I file Form 1040EZ?
No, if you file Form 1040EZ, you cannot deduct tax preparation fees because Form 1040EZ does not allow for itemized deductions.
11. Can I deduct tax preparation fees for previous years that I never claimed?
Yes, if you missed claiming tax preparation fees in previous years, you can file an amended return to claim those deductions retroactively.
12. Can I deduct tax preparation fees for state tax returns?
Yes, tax preparation fees for state tax returns can be deducted as part of your miscellaneous itemized deductions, subject to the 2% AGI limit, if you choose to itemize deductions on your federal return.