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- The short answer under current federal law
- Why older explanations mention 2025
- Business-related preparation costs follow a different route
- Rental, royalty, and farm portions are separated too
- Allocation matters when one invoice covers several kinds of work
- Investment-related fees do not automatically escape the rule
- The payment year can differ from the return year
- Federal and state deductions are separate questions
- Sources
Key Facts
- Federal level: Personal tax preparation fees are not deductible as miscellaneous itemized deductions under current federal law.
- Federal level: Congress removed the former January 1, 2026 endpoint, so the disallowance continues for taxable years beginning after 2025.
- Federal level: A sole proprietor may generally deduct the part of a preparation fee attributable to the business portion of the return.
- Federal level: Preparation costs allocable to rental or royalty activity may generally be deducted on Schedule E, and farm-related preparation costs may generally be deducted on Schedule F.
- Federal level: A mixed personal and business bill requires a reasonable allocation because the personal portion does not become deductible merely by appearing on the same invoice.
The short answer under current federal law
For an individual’s personal federal return, tax preparation fees are not deductible. This includes personal charges for a preparer, tax software, tax publications, and electronic filing.
The answer can change for the portion of a fee tied to operating a business, earning rental or royalty income, or farming. Those expenses are analyzed under rules for the income-producing activity rather than as personal tax deductions.
Why older explanations mention 2025
Before 2018, tax preparation fees could fall within miscellaneous itemized deductions subject to a two-percent-of-adjusted-gross-income floor. The 2017 tax law then suspended miscellaneous itemized deductions for taxable years beginning after December 31, 2017, and before January 1, 2026.
That scheduled endpoint is now obsolete. Public Law 119-21, enacted July 4, 2025, removed the January 1, 2026 ending date, and current 26 U.S.C. § 67 states that no miscellaneous itemized deduction is allowed for taxable years beginning after December 31, 2017.
As a result, the former personal deduction did not return for 2026. Older articles describing the suspension as only a 2018-through-2025 rule do not reflect the 2025 amendment.
Business-related preparation costs follow a different route
Section 162 of the Internal Revenue Code generally allows ordinary and necessary expenses paid or incurred in carrying on a trade or business. IRS guidance applies that rule to fees charged by accountants and other professionals for work directly related to a sole proprietorship.
The cost of preparing the Schedule C portion of an individual return can generally be deducted on Schedule C. Fees for business tax advice and for resolving an asserted tax deficiency connected with that business can also fall within the business category.
Rental, royalty, and farm portions are separated too
IRS guidance treats fees for preparing Schedule E rental or royalty information as expenses of that activity rather than personal return-preparation costs. Publication 527 specifically identifies the cost of preparing Schedule E, Part I as a deductible rental expense.
Preparation costs connected with farm income and expenses generally belong with the farming activity on Schedule F. These activity-based deductions are distinct from the disallowed miscellaneous itemized deduction for preparing the personal remainder of Form 1040.
Allocation matters when one invoice covers several kinds of work
A preparer may charge one fee for a return containing personal items, Schedule C business activity, and Schedule E rental activity. Federal tax treatment follows the work represented by each portion, not merely the total bill.
IRS small-business guidance permits only the business portion when a professional fee or software cost has both business and personal uses. An allocation supported by an itemized invoice, engagement terms, or another contemporaneous record preserves the distinction between deductible activity costs and nondeductible personal costs.
Investment-related fees do not automatically escape the rule
Section 212 describes certain expenses for producing income and determining tax, but an individual’s section 212 deductions are generally miscellaneous itemized deductions unless another Code provision removes them from that category. The continuing section 67 disallowance therefore prevents a personal deduction merely because tax preparation involved investment income.
This is different from preparation work properly allocable to a trade or business or a rental activity. The legal category of the underlying activity controls, not whether the return was complicated or the fee was expensive.
The payment year can differ from the return year
For a cash-method taxpayer, an otherwise deductible preparation expense is generally considered in the year it is paid. Publication 527 illustrates this timing by treating a fee paid in 2025 to prepare the 2024 Schedule E as a 2025 rental expense.
Timing does not convert a personal fee into a business deduction. It determines the year for a fee only after the fee’s deductible character and proper allocation have been established.
Federal and state deductions are separate questions
This article addresses federal income tax law. A state may use a different starting point, allow its own deduction, or require a state-specific adjustment, so the federal result does not establish the result on every state return.
Sources
- Public Law 119-21, section 70110
- 26 U.S.C. § 67, miscellaneous itemized deductions
- 26 U.S.C. § 162, trade or business expenses
- 26 U.S.C. § 212, expenses for production of income
- IRS Publication 529, Miscellaneous Deductions
- IRS Publication 334, Tax Guide for Small Business
- IRS Publication 527, Residential Rental Property
