Are tax preparation fees deductible in 2018?
Tax preparation fees have always been a topic of debate among taxpayers, especially when it comes to determining whether these expenses can be deducted from their taxable income. In 2018, the question of whether tax preparation fees are deductible has gained significant attention due to changes in the tax code. This article aims to provide a comprehensive overview of the current rules regarding tax preparation fees and their deductibility in 2018.
Understanding the Deduction
Before delving into the specifics of 2018, it is essential to understand the general concept of tax preparation fees. Tax preparation fees refer to the costs incurred when hiring a professional, such as a Certified Public Accountant (CPA), Enrolled Agent (EA), or tax preparer, to assist in the preparation and filing of tax returns. These fees can include the cost of software, consultations, and other related expenses.
Changes in the Tax Code
In previous years, tax preparation fees were typically deductible as a miscellaneous itemized deduction. However, the Tax Cuts and Jobs Act (TCJA), which was enacted in December 2017, made significant changes to the tax code, including the elimination of miscellaneous itemized deductions for tax years 2018 through 2025.
Impact on Deductibility
As a result of the TCJA, tax preparation fees are no longer deductible for most taxpayers in 2018. This means that individuals cannot claim these expenses as a deduction on their tax returns for that year. However, there are a few exceptions to this rule.
Exceptions to the Rule
One exception applies to taxpayers who itemize deductions on Schedule A. For those who choose to itemize their deductions, tax preparation fees may still be deductible, but only if they are classified as a miscellaneous itemized deduction. However, it is important to note that the overall amount of miscellaneous itemized deductions is subject to a 2% of adjusted gross income (AGI) floor.
Another exception is for taxpayers who are self-employed. Self-employed individuals can deduct tax preparation fees as a business expense on Schedule C, as long as they itemize their deductions on Schedule A.
Conclusion
In conclusion, for most taxpayers, tax preparation fees are not deductible in 2018 due to changes in the tax code. However, there are exceptions for those who itemize deductions or are self-employed. It is crucial for individuals to understand the current tax laws and consult with a tax professional to ensure they are taking advantage of all available deductions and credits.
