Yes. In most cases, you can only deduct these expenses in the tax year in which you incur them.
The IRS is generous in the latitude it grants for tax treatment of patent expenses. For tax year 2017, the IRS allows businesses or individuals to deduct expenses pertaining to research and development. Not every expenditure relating to research and development qualifies as a deduction, but patent expenses do.
When it comes to patents, many related expenses are deductible, including attorney’s fees. Such legal fees are considered part of research and experimental costs, as defined by the IRS. Other deductible expenses include the costs of applying for the patent and the research required for patent development. If you had to hire outside experts, like an engineering firm, to develop the patent, those expenses, including salaries, are deductible as well. The cost of the materials used in creating the patent are also deductible expenses.
The IRS does not permit deduction of certain expenses that may prove part of the patent process. These include:
- quality control testing
- research of similar or historical products
- promotion or advertising
- consumer or efficiency surveys
- management studies
If you have a business, the expenses will be on Schedule C.
1. After sign in / select Take me to my return
2. At the right upper corner, in the search box , type in schedule C and press Enter /
3. Select the 1st choice on the search results - Jump to schedule C /
Follow the prompts to enter information about your business..
4. When comes to this screen, Your Business (Business Income and Expenses) /
5. Scroll down to Business Expenses section, select Other Common Business Expenses- Start / Other Miscellaneous Expenses
If you do not have a business:
If the intent in applying for the patent is to produce taxable income, this could be an Investment Fee or Expense.
These costs are Miscellaneous Deductions and are deductible to the extent that they exceed 2% of your adjusted gross income.
You can enter the expenses this way:
1. Federal Taxes >
2. Deductions and Credits >
3. Other Deductions and Credits >
4. Other Deductible Expenses.
TurboTax will do the math to see if your expenses are a deduction on your tax return.
