Can You Claim Tax Preparation Fees on Your Taxes?

You can claim tax preparation fees on your taxes only if the fees relate to business income, rental property, a farm, or an estate or trust return. If your income comes solely from a W-2, the federal deduction is not available to you, and the One Big Beautiful Bill Act of 2025 made that unavailability permanent.

W-2 Wage Earners Cannot Deduct These Fees Federally

Before 2018, anyone who itemized could claim tax preparation fees as a miscellaneous itemized deduction, provided those fees plus other miscellaneous expenses topped 2% of adjusted gross income. The Tax Cuts and Jobs Act suspended that deduction for tax years 2018 through 2025.¹

Many taxpayers expected the deduction to come back in 2026 when that suspension expired. It won’t. The One Big Beautiful Bill Act amended Section 67 of the Internal Revenue Code to strike the expiration date, so the elimination now applies to all tax years after 2017 with no end.² The updated statute states that “no miscellaneous itemized deduction shall be allowed for any taxable year beginning after December 31, 2017.”³

If wages or salary are your only income, hiring a preparer or buying tax software is a personal expense on your federal return. The same applies to unreimbursed employee expenses that used to sit in the same bucket.

If You File a Schedule C, the Business Portion Is Deductible

Self-employed filers operate under a different rule entirely. Section 162 of the tax code allows a deduction for “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.”⁴ Preparing the business part of your return, or buying software to handle your Schedule C, qualifies. That deduction was never suspended because it reduces business income directly rather than flowing through the miscellaneous itemized deduction category.

Only the business share of the fee counts. If your accountant charges $800 for the full return and spends roughly half the time on your Schedule C, you deduct about $400. Most preparers will break out the business and personal portions on the invoice if you ask, and that allocation matters because the IRS can challenge a deduction that lumps everything together.

Tax software works the same way. If you buy a base program for $120 and pay to upgrade to a version that handles self-employment income, the incremental cost of the upgrade is what’s deductible. Keep the receipt showing which version you bought and what it cost.

Rental Property and Farm Income

Landlords and farmers can deduct the portion of their preparation fees tied to those activities. The Schedule E instructions specifically allow “fees for tax advice and the preparation of tax forms related to your rental real estate or royalty properties” on Line 10.⁵ Farmers deduct the equivalent costs on Schedule F as part of operating expenses.

The reasoning tracks the self-employment rule. Preparing a rental schedule means calculating depreciation, tracking repairs, and allocating mortgage interest. Preparing a farm return means handling commodity sales, equipment depreciation, and crop insurance proceeds. That’s work a personal 1040 wouldn’t require.

If you own several rental properties and one is generating a loss you’re using to offset income from another, ask your preparer to allocate time across the properties. It isn’t strictly required, but a clear breakdown protects the deduction if the return is examined.

Estates and Trusts Get the Fullest Deduction

Estates and non-grantor trusts fare best. The cost of preparing Form 1041 is fully deductible because it falls under a special category: expenses that would not have been incurred if the property were not held in an estate or trust. An individual never files a Form 1041, so the preparation cost is inherent to the fiduciary structure.⁶

The IRS confirmed through final regulations that this category is not caught by the permanent suspension of miscellaneous itemized deductions.⁷ Fees go on Line 14 of Form 1041, labeled “Attorney, accountant, and return preparer fees.” The deduction also covers preparation of the decedent’s final individual return, estate tax returns, and generation-skipping transfer tax returns. Investment advisory fees charged for ordinary asset management sit outside this protection, so fiduciaries should have those unbundled on the invoice.

Some States Still Allow the Deduction

Not every state followed the federal government in eliminating miscellaneous itemized deductions. A number of states never conformed to the TCJA suspension, so their residents can still claim tax preparation fees on the state return even though the federal deduction is gone. Rules and the 2% AGI threshold vary, so check your state’s current forms or revenue department website.

Where the state deduction survives, it usually works the way the old federal rule did: itemize on the state return, add up miscellaneous deductions including preparation fees, subtract 2% of AGI, and deduct what remains.

Allocating Fees Between Personal and Business Work

The split between deductible and non-deductible portions is where most mistakes happen. The cleanest fix is to ask your preparer for an itemized invoice. A line item showing “$350 for Schedule C preparation” and “$200 for personal 1040 preparation” gives you a defensible allocation without guesswork.

When the preparer doesn’t provide a breakdown, you need a reasonable estimate. Common methods include dividing by the number of schedules or forms prepared, or estimating based on time spent. Whichever you pick, write it down and keep it with your tax records. An allocation that looks arbitrary or inflated draws scrutiny.

Where to Report the Deduction on Your Return

Reporting the fee on the right line matters as much as qualifying for the deduction:

Sole proprietors report the business portion on Schedule C, Line 17, which covers legal and professional services. This reduces net business profit before self-employment tax.
Rental property owners enter fees for tax advice and return preparation on Schedule E, Line 10.⁵
Farmers report accounting and preparation costs among operating expenses on Schedule F.
Estates and trusts deduct preparation fees on Form 1041, Line 14.⁶

For self-employed filers, placing the fee on Schedule C lowers both income tax and self-employment tax because it comes off the top of business revenue. Putting the fee on the wrong schedule, or slipping the personal portion into a business schedule, is one of the easier errors for the IRS to spot.

Records to Keep

The IRS expects documentation showing who you paid, the amount, proof of payment, the date, and a description of the service.⁸ For preparation fees, that means:

An itemized invoice showing the preparer’s name, the total fee, and the breakdown between personal and business work.
Proof of payment such as a canceled check, credit card statement, or bank record.
Purchase confirmations or account statements for tax software, showing the product name, version, and price paid.

Hold these records for at least three years from the date you file the return that claims the deduction. That’s the general period during which the IRS can assess additional tax.⁹ A return filed early is treated as filed on the due date, so the clock starts on April 15 regardless of when you actually submitted it.

1
Joint Committee on Taxation. General Explanation of Public Law 115-97 – Section: Part V Deductions and Exclusions
2
Senate Budget Committee. The One Big Beautiful Bill Act – Section 70110
3
Office of the Law Revision Counsel. 26 USC 67 – 2-Percent Floor on Miscellaneous Itemized Deductions
4
Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses
5
Internal Revenue Service. 2025 Instructions for Schedule E (Form 1040)
6
Internal Revenue Service. Instructions for Form 1041 and Schedules A, B, G, J, and K-1 (2025)
7
Federal Register. Effect of Section 67(g) on Trusts and Estates
8
Internal Revenue Service. What Kind of Records Should I Keep
9
Internal Revenue Service. Topic No. 305, Recordkeeping