If you’re a small business owner, the costs of running your business—from payroll to bookkeeping—add up fast. One of the most overlooked opportunities to lighten the load? Tax preparation fees.
But let’s get right to the point: Are tax preparation fees deductible for small business owners?
Yes—if the fees are connected to your business taxes.
Let’s break down what that means, how much you can deduct, and what other related expenses the IRS lets you write off.
Table of Contents
Can You Deduct Tax Preparation Fees?
Under current IRS rules, individual taxpayers can’t deduct tax prep fees on their returns (thanks to the 2017 Tax Cuts and Jobs Act, this remains the case through at least 2025).
But can you deduct tax preparation fees if you’re a business owner?
Absolutely.
If you’re self-employed, a sole proprietor, or run an LLC, S Corp, or partnership, the portion of your tax prep costs that directly relates to your business is fully deductible as a business expense. That’s right—the deduction of tax preparation fees is allowed for business-related filings.
Translation: If you paid someone to prepare your business taxes, that part of the bill is a valid write-off.
Are you confident your business tax filings are fully optimized and compliant?
What Part of the Fee Counts?
Most tax professionals bundle personal and business tax prep into one invoice. But not all of it is deductible. Only the portion tied to your business qualifies.
Example:
You pay $1,000 to your CPA. $700 was for preparing your Schedule C or business return; $300 was for personal filing.
You can deduct the $700 as a business expense. The $300 is not deductible.
Best practice: Ask for an itemized invoice. If your preparer can’t split it for you, make a reasonable allocation based on time or complexity—and document it.
What Counts as a Deductible Tax Prep Expense?
Here’s what typically qualifies:
- Preparing business returns (Schedule C, 1120, 1120-S, 1065, etc.)
- State and local business tax filings
- Bookkeeping is done specifically for tax purposes
- Tax-related consultations for your business
- Electronic filing fees for business forms
These expenses are typically categorized under “Legal and Professional Services” (e.g., Schedule C, Line 17).
Are tax preparation fees deductible if you used software or a CPA? Yes- what matters is the nature of the service, not who provides it.
Are Accounting Fees Tax Deductible?
Yes. If you’re paying for bookkeeping, financial statements, or accounting consultations that help run your business, those accounting fees are tax deductible.
Here’s what typically qualifies:
- Monthly bookkeeping services
- Financial reports required for tax filing or lenders
- QuickBooks setup and support
- Year-end reconciliation
- CFO-level financial guidance
As long as it’s tied to your business operations, it’s a legitimate deduction.
What About LLC Filing Fees? Are They Deductible?
Yes, LLC filing fees are tax deductible. The IRS generally classifies these as administrative expenses. This includes:
- State formation fees
- Annual report fees
- Registered agent fees (if required by your state)
- Legal or accounting help to file paperwork
If you’re forming an LLC, some of those startup costs may need to be amortized over time—but if it’s a recurring annual fee, you can deduct it in the year paid.
Can You Deduct Consulting and Management Fees?
Yes, as long as the services are related to your business.
Consulting Fees
These are fully deductible if they support your business operations, growth, or compliance.
Common deductible examples:
- Tax strategy sessions
- Business structure consultations
- Hiring, staffing, or operational advising
- Financial or budgeting analysis
Management Fees
These are also deductible when they’re tied to overseeing or managing your business processes—such as paying a payroll company or contracting a fractional CFO.
Rule of thumb: If the service directly helps you operate, grow, or stay compliant as a business, the cost is deductible.
How to Properly Claim These Deductions?
To make sure your deduction of tax preparation fees (and similar expenses) holds up, here’s what to do:
- Request detailed invoices: Your preparer should separate personal and business costs.
- Record fees accurately: Book them as “Legal and Professional Services” or their applicable category.
- Save everything: Invoices, email confirmations, the scope of work—store them in case of an audit.
- Don’t mix personal deductions: Personal tax prep is not deductible. Only the business portion counts.
Be consistent: Apply the same allocation method year after year to avoid raising red flags.
Quick Reference: What’s Deductible?
| Expense Type | Deductible? | Notes |
| Personal tax return prep | No | Not allowed under current tax law |
| Business tax return prep | Yes | Fully deductible if tied to business |
| Bookkeeping for taxes | Yes | Must be business-related |
| LLC registration/renewal | Yes | Deduct as admin expense |
| Business tax consulting | Yes | Financial and strategic consulting counts |
| Management company fees | Yes | For HR, payroll, or financial oversight |
Why It Pays to Track These Deductions?
Let’s say you spend $1,500 a year on tax prep and accounting services tied to your business. That’s $1,500 off your taxable income. If you’re in the 24% federal tax bracket, that’s a $360 tax savings—just for tracking and deducting a cost you were going to pay anyway.
Multiply that by several years or by a growing business, and these “small” deductions start to make a big difference.
Conclusion
Yes—if you run a business and the fees relate to business tax work, you can and should deduct them. It’s one of the most straightforward deductions out there, but it’s often overlooked when business and personal finances overlap.
Remember:
- Personal tax prep = not deductible
- Business tax prep = deductible
- Ask for itemized invoices
- Track and categorize correctly
Orbit Accountants help small businesses do more than just file their taxes. We help you understand them—and use them strategically. Our team will help you:
- Maximize your deductions
- Stay IRS-compliant
- Organize your books for clean, easy-filling
Get in touch with Orbit Accountants today and let’s make tax season less painful and more profitable. Book a free consultation, now!
Frequently Asked Questions:
Can I deduct tax preparation fees as a business expense?
Yes, you can deduct tax preparation fees if they are related to preparing your business tax return. However, the portion of the fee related to your tax return is not deductible.
Are LLC filing fees tax deductible?
Yes, LLC state formation fees, annual renewal charges, and similar administrative expenses are considered tax-deductible business expenses.
Can a business write off consulting fees?
Yes, consulting fees are deductible if the services provided are directly related to your business operations, financial planning, or strategy.
Are management fees deductible for income tax purposes?
Yes, management fees are deductible as long as they are incurred in the course of managing your business operations, finances, or compliance-related tasks.
Disclaimer: This blog is for informational purposes only and does not constitute legal or tax advice. Always consult with a qualified professional regarding your specific situation.
