What Accounting and Tax Expenses Can I Deduct?

And Some Deductions the IRS Won't Allow

Business Accounting and Tax Expenses
Business Accounting and Tax Expenses. Lisa J. Goodman/Getty Images

A business can deduct accounting and tax expenses. Of course, there are limitations, as with every deduction. This article discusses what types of accounting and tax expenses you can deduct to lower your business taxes. 

What Accounting Expenses Can I Deduct From Business Taxes?

Accounting expenses, auditing expenses, and bookkeeping expenses are all deductible business expenses. Here is a more detailed list of accounting-related expenses you can deduct:

Bookkeeping expenses. You can deduct all expenses for bookkeeping, including those for a bookkeeper, or for bookkeeping and accounting software to help you or an employee do your bookkeeping.

Accountant/CPA/Financial Adviser The services of an accountant, CPA, or financial adviser for review of financial statements or business (but not personal) financial planning.

Auditing. If you are a public corporation, you can deduct fees for an auditing firm.

Barter. Accounting for barter transactions, including costs for a barter exchange are deductible. 

Cash transactions. You can deduct the cost of accounting for cash transactions

What Tax Expenses Can I Deduct from Business Taxes?

Tax Strategy and Tax Preparation. The services of a CPA, tax attorney, or tax adviser, for tax strategy and tax preparation, including preparing and filing forms. You can also deduct the cost of tax preparation software for your small business taxes.

Other Tax Issues. Services of a CPA, Enrolled Agent, or tax attorney to prepare for and attend tax audits and investigations, to represent you before the Internal Revenue Service or Tax Court.

Costs of Defense. You may also deduct your costs for travel and other expenses to defend against the IRS or state agency audits or challenges, as well as expenses you paid to advisers for their expenses.

What Accounting and Tax Expenses are Not Deductible?

Expenses for accounting for illegal activities are never deductible. 

You cannot deduct the cost of accounting software or the services of a tax preparer, for your personal tax return. If you have your business and personal tax returns prepared by a tax preparer, ask to have the bill for your Schedule C (the small business tax form) separated from the cost of preparing your personal tax return, and pay the business tax bill with a business check. 

Preparation of your Schedule SE for self-employment taxes is a personal tax expense, and it can't be deducted as a business expense. 

If your business is a corporation or partnership, you can deduct the preparation of this business return, but you can't deduct any expenses for including that business tax information in your personal tax return. 

You can't deduct fines and penalties for late filing or under-paying your taxes, so make sure you know the tax filing deadlines and that your tax preparer or tax software is accurate. 

Read about other deductions the IRS will say no to.