Can i write off business license fee?

[Marketstar · Accepted solution]

Yes, you can claim your business license fee in the Legal and Professional Fee category in the following area:

Type in schedule c in the search box, top right of your screen

Click on the first category Jump to schedule c link

Follow the prompts and online instructions

Arrive at the Your Business page

Scroll down to the Business Expense category

Click start or update next to Other Common Business Expenses category

Arrive at the Let's write off some business expenses page

Scroll down to the Legal and Professional Fees category to make your entry

[Taxes202112]

@Marketstar 

Hello , I have TurboTax Deluxe Mac Download version. I have no business income to report and no expenses apart from the licensing fee for the state of Delaware. I had two quick questions:

1. I live and work in CA. Do I have to file taxes in two different states?

2. can I use my version to report that I have no expenses and no income apart from the licensing fee, or do I need to get TurboTax self-employed?

thank you!

[Vanessa A]

1.  If you have no income in DE you would not need to file an income tax return, however, depending on the license type you may need to file an informational return.

2. Yes, you can enter your licensing fee in Deluxe as a business expense if you are a sole proprietor.  

[2021Taxes_TT]

Thanks! A few quick follow up questions:

1. My business had no income in 2021, but it did have $5000 of income in 2022. The license fees were about $150 paid in 2021. Can I deduct the $150 on my 2021 taxes even though I had no income using Turbotax Deluxe, and then file the $5000 next year for 2022 taxes?

2. To confirm, I live in CA, but opened my business virtually in Delaware. If I were to deduct the $150 this year, could I still just file my tax return in CA and not have to purchase an extra state? How about for next year? 

[Vanessa A]

1. Yes, you can claim the $150 licensing fees as start up costs for 2021 without reporting any income for 2021 since you had no income for 2021. You can then claim your income of $5,000 in 2022 when you file that return. You would not be able to claim those fees in TurboTax Deluxe online.  You would need to upgrade to TurboTax Self-Employed.  If you are using the download version of Deluxe, yes, you could claim the start up costs.  

2. As long as you are treated as a sole proprietor, you do not have to file a return with DE to show a loss.  If you would be taxed as a corporation, then you would need to file a DE return even if you had no income.