Tuesday Tax Tip: Tax Deduction for Tax Preparation Fees
Whether you paid someone to prepare your tax return or filed them yourself, most fees incurred are tax deductible. And we like tax deductions because it lowers our taxable income so we can can keep more of our hard earned money.
Example of fees that are tax deductible:
• Tax preparation software programs such as TurboTax
• Tax publications or books to help understand federal taxes
• Cost paid to professional that prepared your tax returns
• Fees paid to electronically file your return
Example of fees that are not tax deductible:
• Fees or charges paid in connection with applying or obtaining refund anticipation loans
• Paying yourself for preparing your own tax return
When to Report Tax Preparation Fees
Deduct tax preparation fees in the year you paid them. For example, if you purchased tax software in March of 2012 to prepare 2011 tax return, you deduct these cost on your 2012 tax return.
Where to Report Tax Deduction
For most taxpayers, report costs associated with preparing your federal tax return on Line 22, Schedule A. If you are self-employed or own rental property, the portion of tax preparation fees associated with the business or rental property can be deducted on the right form.
If you are self-employed with a business or have income as a Sole Proprietor, report costs associated with preparing your business income on Schedule C. If you are self-employed as a Farmer, use Schedule F to claim tax preparation fees. If you have Rent or Royalty Income, report appropriate cost on Schedule E.
Example of Schedule A:
More information on deducting costs associated with preparing and filing your federal tax return is found in Pub 17 at IRS.gov.
Read tips for saving money with your federal taxes by clicking on the above tab labeled “Tax Return Tips”.
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