What are legal and professional fees for tax purposes?

Legal fees that are deductible Fees that are ordinary and necessary expenses directly related to the operation of your business (must be entered on Form 1040, Schedule C). Fees for resolving tax issues, counseling, or preparing tax forms related to your business (must be included on Form 1040, Schedule C). Certain payments made in cases of sexual harassment or abuse. In general, you can deduct licenses and regulatory fees for your activity or business that are paid annually to state or local governments.

Some licenses and fees may need to be amortized. See Chapter 8 for more information. In general, professional fees should be classified as operating expenses in a company's income statement. However, there may be some cases where professional fees are classified as other expenses, such as certain legal fees that are considered one-time charges.

Legal fees are tax deductible if they are incurred for business reasons. The deduction can be requested on business returns (for example, on Form 1065 for a company) or directly on Schedule C of personal income tax returns.

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