Can I claim tax prep fees as a deduction?
Although tax preparation fees are an allowable deduction, most taxpayers are unable to take advantage of it.
The reason? To get the deduction, you need to:
- Itemize your deductions; and
- The sum of your miscellaneous expenses (which also includes things like unreimbursed employee-related expenses, investment expenses, and safe deposit box fees) must exceed 2% of your Adjusted Gross Income (AGI).
Even then, you're only allowed to deduct the miscellaneous expenses above and beyond 2% of your AGI – not the full amount.
For example, a taxpayer with an AGI of $35,000 and no miscellaneous expenses (other than tax prep fees) would need to have paid over $700 in tax prep fees before they can begin taking advantage of the deduction – assuming they itemize.
And even if this taxpayer met the criteria and paid $1,000 in tax prep fees, he or she would only be able to deduct the amount above and beyond $700 (in this case, $300).