Are Tax Prep Fees Deductible? IRS Rules You Need to Know in 2025

Tax season can be stressful, especially when you are trying to figure out which expenses you can deduct. One common question that may come to your mind is, Are tax prep fees deductible?

Understanding the IRS rules for 2025 can help you decide whether you can claim these costs on your tax return.

Understanding Tax Preparation Fees

Tax preparation fees are the costs you pay to get your taxes done. It could be hiring a tax professional or buying tax software to prepare your return. These fees usually include things like:

●     Having a Certified Public Accountant (CPA) or tax advisor.

●     Purchasing tax preparation software.

●     Paying for electronic filing services.

●     Consulting fees for tax advice.

The question remains for many taxpayers. Are tax prep fees deductible? Let's explore the IRS rules for 2025 to find out.

Personal Tax Returns

As of 2025, the IRS doesn’t let you deduct tax preparation fees on personal tax returns. This applies to fees you pay for preparing Form 1040, which most W-2 employees and individuals without business income use. Our individual tax services make filing very simple and less stressful for you.

The Tax Cuts and Jobs Act (TCJA), which was introduced in 2017, removed the option to deduct miscellaneous itemized expenses. This includes tax preparation fees, and that rule still stands.

So, you can’t deduct those tax preparation fees if you are filing a personal tax return and don’t have business income.

Business Tax Returns

You can usually deduct tax preparation fees tied to your business tax returns if you are self-employed or run a business. The IRS lets you claim expenses that are ordinary and necessary for your business. That also covers the fees you pay to prepare business-related tax forms, like:

●     Schedule C: Profit or Loss from Business.

●     Schedule E: Supplemental Income and Loss.

●     Schedule F: Profit or Loss from Farming.

These deductions cover the costs that are directly tied to preparing your business tax returns. But you will need to split the fees carefully if your tax preparer works on both your personal and business taxes. Only the portion of the fees related to your business activities is deductible.

Real Estate Investors

If you invest in real estate, you may be wondering, “Are tax prep fees deductible for rental properties?” You may be able to deduct tax preparation fees linked to your rental properties if you invest in real estate. When you report rental income and expenses on Schedule E, the IRS sees that as part of your business activity.

That means the tax preparation fees for your rental property tax returns can count as business expenses.

You can explore our real estate tax services to see how we can help you manage deductions and filings more efficiently.

Tax Preparation Software and Electronic Filing Fees

The cost of tax preparation software or electronic filing services usually counts as a personal expense, so you can’t deduct it on your individual tax return.

But you can deduct those costs as business expenses if you are self-employed or run a business. You can use that software just for your business tax returns.

Recordkeeping and Documentation

You need to keep good records if you want to claim deductions for tax preparation fees. Save your receipts, invoices, and any messages from your tax preparer.

Ask for an itemized bill that displays the cost for each if they handle both your personal and business taxes. This way, you can make sure you only deduct the part that actually applies to your business.

FAQs

• 1. Can I deduct tax preparation fees if I use a tax professional for both personal and business matters?

  Yes, you can deduct the part of the fees that’s linked to your business activities. Just make sure your tax preparer gives you an itemized bill that clearly separates the personal and business portions.

• 2. Are tax prep fees deductible for rental property owners?

  You may be able to deduct your tax preparation fees if you report your rental income and expenses on Schedule E. The part that relates to your rental properties can count as business expenses.

• 3. Can I deduct the cost of tax preparation software?

  You usually can’t deduct the cost of tax preparation software if you file as an individual. But if you are self-employed and use that software for your business tax returns, you can count it as a business expense.

• 4. How do high-income earners reduce taxes?

  You can lower your taxes with smart planning if you earn a high income. You can do this in a few ways. Claim your business expenses. Take eligible deductions for tax preparation services. Add more to your retirement accounts and manage your investments wisely.

• 5. Which expense is not tax-deductible?

  Not every expense can be deducted. For example, your personal costs like groceries, clothes, or personal travel don’t qualify. The same goes for fees you pay for personal tax preparation services. You can’t deduct them on your personal tax return.

Final Thoughts

It’s important to understand the IRS rules about tax preparation fees, especially if you have been thinking, Are tax prep fees deductible? The answer helps you get the most out of your deductions and keep your tax bill low.

Personal tax preparation fees usually aren’t deductible, but if you are a business owner or self-employed, you might be able to claim them.

Keep your records clear and work with a tax professional who knows the rules. That way, you can make sure you are not missing any deductions.

Need help with your tax preparation? Reach out to Skyline Financial Management, and we will guide you through tax season with confidence.