Are Accountant Fees Tax Deductible? Smart Ways to Save on Taxes
It’s tax time, and if you’re crunching numbers or paying someone else to, you might be wondering: Are accountant fees tax deductible? The short answer is: it depends. While some fees may qualify as a tax deduction, others do not. Understanding the rules can help you save money and stay on the right side of the law.
Let’s walk through what kinds of tax preparation costs qualify, who can deduct them, and what small business owners in Denver should know when preparing their taxes.
Understanding What Makes Fees Tax Deductible
To determine whether you can deduct tax preparation fees, it helps to know how the IRS views such expenses. In general, only certain tax prep costs related to your business are deductible. The key is whether the fee is considered an “ordinary and necessary business expense.”
What Are Tax Preparation Fees?
A tax preparation fee includes costs paid for:
Hiring a CPA or accountant
Services provided by a professional tax preparer
Purchasing tax software
E-filing fees
Legal or consulting services directly related to preparing your taxes
If these expenses are related to preparing your business return, they may be deductible.
Are Tax Preparation Fees Deductible for Business and Personal Returns?
Business vs Personal: The Big Difference
Business tax preparation fees are typically deductible.
Personal tax preparation fees are not deductible under the current tax law. This change came with the Tax Cuts and Jobs Act, which eliminated the miscellaneous itemized deduction for personal tax prep costs from 2018 through at least 2025.
If you’re a small business owner, self-employed, or file Schedule C, some or all of your tax prep fees may qualify as business tax deductions.
When Tax Prep Fees Are Deductible
Here’s how different types of taxpayers are affected:
Self-Employed Individuals & Small Business Owners
If you’re self-employed, own a sole proprietorship, or operate through a limited liability company (LLC), you can typically deduct the portion of your tax preparation fees related to your business.
This includes:
Fees related to preparing Schedule C (Profit or Loss from Business)
Tax filing for your business returns
Bookkeeping and accounting fees related to your business
Professional tax advice directly tied to your business income
These costs are considered deductible business expenses and can be written off on your Schedule C.
Rental Property Owners
If you file Schedule E (Supplemental Income and Loss) for rental income and related expense reporting, you may deduct the portion of tax prep fees allocated to that property.
W-2 Employees & Individuals Filing Personal Returns
If you’re a W-2 employee or someone filing a standard personal tax return, you cannot deduct personal tax preparation fees. This includes:
Fees for personal use of tax software
Fees paid for guidance not tied to business income
Legal fees for services rendered solely for preparing a personal tax return
In short, personal tax preparation fees are not deductible, according to the IRS.
How Much of Your Fee Is Deductible for Business?
When your accountant prepares both business and personal returns, you must split the expense based on the services performed for each part.
Only the business portion of the tax preparation fee is deductible.
Example:
If your CPA charges $1,200 to prepare your complete tax return and $800 of that is for Schedule C and business tax forms, you can deduct the $800 as a business expense. The remaining $400 for your personal return is not deductible.
Keep good records and ask your CPA or accountant for a breakdown of fees - especially if combined services are offered.
Which Tax Preparation Fees Are Deductible for Businesses?
Here’s a closer look at preparation fees deductible for businesses:
If the fees are related to your business, they are generally deductible as a business expense. This aligns with IRS tax rules surrounding legal and professional services.
How to Deduct Tax Preparation Fees as a Business
To deduct tax preparation fees as a business:
Keep clear documentation. Have your accountant or tax professional separate business and personal charges.
Enter the business portion on your return. For self-employed taxpayers, this is generally listed on Schedule C, under “Legal and professional services.”
Use appropriate forms like Form 1040, Schedule C, or Schedule E depending on your business structure and income type.
If you’re unsure, a qualified Certified Public Accountant (CPA) can help you itemize correctly and avoid claiming fees that are not deductible.
Common Tax Deductible Professional Fees
Aside from tax prep, other professional services that can be written off include:
Financial advice that’s strictly business-related
Consulting fees tied to business income
Bookkeeping services
Legal fees for business formation or compliance
Again, these fees must be ordinary and necessary for your business.
What Self-Employed Taxpayers Need to Know
If you’re a self-employed individual, you benefit the most from being able to deduct your accounting fees and business tax preparation costs. These expenses help reduce your tax liability and improve your overall income statement.
Just remember:
Allocate personal vs business use when applicable.
Use tax software correctly if filing without a pro.
Keep receipts and fee breakdowns from your CPA.
Self-employed individuals are often audited more frequently, so solid bookkeeping matters.
What About Other Business Tax Deductions?
Business tax deductions come in many forms beyond tax prep fees:
Home office use
Office supplies
Vehicle mileage or expenses
Depreciation on equipment
Marketing and web hosting
Business meals and food (within limits)
Make sure you classify your deductible expenses appropriately using IRS categories.
Need Help with Your Business Tax Returns?
If you’re a business owner in Denver and feel overwhelmed at tax time, working with a trustworthy, local professional can make all the difference.
A knowledgeable tax accountant in Denver like AY Miller, can help you understand what fees are deductible, how to deduct tax preparation fees, and avoid costly mistakes.
Final Thoughts: Are Accountant Fees Tax Deductible?
So, are accountant fees tax-deductible? If they are related to your business, the answer is yes. You can typically deduct:
CPA fees for preparing your business tax return
Accounting fees tied to your business income and filings
Software and tax preparation services used for your business
However, if you’re paying fees for personal tax returns, those costs can't be deducted (at least for now).
Your best move? Keep organized, know the difference between business and personal, and consult a tax professional who knows how to write off tax expenses the right way.
Want to make tax season less stressful? Start by figuring out which fees are deductible for business - and make every deduction count.
