I own a Small Payday Loan store in MO and file a MO Form 2823 yearly. Is this amount deductible on my Schedule C?

[dn1stchoice]

I am required to file MO Form 2823 for my Loan Business.  Am I able to deduct this amount from this years return on Schedule C under taxes.  It is a Credit Institution Tax Return.

[BMcCalpin · Accepted solution]

The Credit Institution Tax Return is a tax assessed on your business' income. Normally, you cannot expense state and local income taxes on your Schedule C (sole proprietorship) (unlike how you can for a corporation)

However, you can deduct this amount on your Schedule A (Itemized Deductions) if your itemized deductions exceed the standard deduction threshold.

Note that one revenue ruling suggested that the IRS might be open to treating a tax like this tax (directly related to your business) as a business expense. See https://www.thefreelibrary.com/The+deduction+of+state+income+taxes+for+Schedule+C+taxpayers.-a020031...

The article correctly states that if you do this, you need to be prepared to defend it. I would consult a local EA or CPA.

[AmandaR1]

Yes, you can enter your state excise type tax as a deduction on your schedule C. You can use whatever category fits the 'business purpose', such as Taxes and licenses or the Miscellaneous category. Enter the amount you paid during 2017. 

You'll notice the form 2823 has the tax added back on line 7, so you won't be able to deduct it for calculating the MO tax. See here: http://dor.mo.gov/forms/2823_2013.pdf

[BMcCalpin]

Thank you for your comment, Amanda, but I am puzzled - the Credit Institution Tax is clearly an income tax, not an excise tax. (excise taxes being mostly on specific goods or penalties on excess IRA, HSA, etc. contributions).