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ik
Level 1

Where do I enter a franchise fee?

I started my business last year and paid $49,500 franchise fee. Can I enter this amount under the other misc expenses and deduct the entire amount? I spent about $5000 on other business expenses, in addition to the franchise fee, which I distributed between varies expense categories. No income yet. 

Thank you!

1 Best answer

Accepted Solutions
Level 1

Where do I enter a franchise fee?

The IRS requires you to amortize this initial franchise fee over 15 years, rather than all at once. The good news is that for the next 15 years, you’ll have that as a tax deduction!

This will be entered as a business asset. Here's how:

  • Business Assets...start
  • Describe Asset....Intangibles
  • Amortizable intangibles
  • Describe... franchise fee...cost $49,500...date
  • None of the above
  • I used 100% for business...date you started using it
  • Code 197
  • The amortization amount is computed as if the asset will be held for 15 years. If it is not renewed at the end of the ten years, the remaining balance can be deducted in the 10th year.

If you have other questions about this, ask in the comment section below.

4 Replies
Level 1

Where do I enter a franchise fee?

The IRS requires you to amortize this initial franchise fee over 15 years, rather than all at once. The good news is that for the next 15 years, you’ll have that as a tax deduction!

This will be entered as a business asset. Here's how:

  • Business Assets...start
  • Describe Asset....Intangibles
  • Amortizable intangibles
  • Describe... franchise fee...cost $49,500...date
  • None of the above
  • I used 100% for business...date you started using it
  • Code 197
  • The amortization amount is computed as if the asset will be held for 15 years. If it is not renewed at the end of the ten years, the remaining balance can be deducted in the 10th year.

If you have other questions about this, ask in the comment section below.

ik
Level 1

Where do I enter a franchise fee?

Thank you! Is there a way to use Section 179 for the franchise fee to write off more this year?
Highlighted
Level 1

Where do I enter a franchise fee?

No, you cannot.
ik
Level 1

Where do I enter a franchise fee?

Thank you again! You've been very helpful!