Can I Claim Professional Services (Accountant, Lawyer) as a Business Expense in United States?
Yes, fees paid to CPAs, tax preparers, attorneys, bookkeepers and consultants for business purposes are fully deductible. Capitalize legal fees that relate to acquiring assets or organizing the business.
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What Internal Revenue Service (IRS) says
IRC Section 162 allows ordinary and necessary business expenses including professional fees. Section 263 requires capitalization of fees related to acquiring or improving capital assets, or organizing/reorganizing a business (amortizable over 180 months under §195). Start-up and organizational costs are treated separately under sections 195 and 248. A business can deduct up to $5,000 of each in the year it starts operating, reduced dollar for dollar once the total passes $50,000, and the rest is amortized over 180 months. Legal fees to defend or protect the title to property are added to the basis of the property.
When you can claim
- Tax preparation fees for business returns (Schedule C, 1120, 1120-S, 1065)
- CPA bookkeeping and advisory fees
- Legal fees for trade contracts, employment matters
- Business consultancy fees
- Registered agent fees (Delaware, etc.)
- Payroll provider fees and annual state filing fees
When you cannot claim
- Legal fees to organize a corporation (capitalize, amortize over 180 months)
- Personal tax return preparation (split between business and personal portions)
- Fees relating to a capital asset acquisition (capitalize into asset basis)
- Legal fees to buy a business or to defend title to property, which are capitalized
Good to know
Pro tip: Ask the CPA or attorney to split each bill between ordinary advice, which is deductible now, and formation or acquisition work, which is capitalized. A single undivided invoice invites a disallowance of the whole amount.
Important: Personal tax preparation fees are not deductible for most individuals. A sole proprietor can deduct the part of the preparation fee that relates to Schedule C, so ask the preparer to bill the business return separately.
Related expenses
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