Can I Deduct a Professional License on My Taxes?

Deductible business expenses cover more than just paper for your office printer. If your job requires you to obtain a license for your trade, business or profession, you can often write off the cost on your taxes. If you're an employee, rather than self-employed, it's harder to claim the deduction, however.

Employees

If you don't work for yourself, the good news is that as long as your employer doesn’t pay for your license, you can write it off as an unreimbursed work expense. The bad news is that you can only write it off if you itemize instead of taking the standard deduction. Worse still, unreimbursed work expenses, which include professional license fees, travel, tools and legal fees for work, are "miscellaneous 2 percent expenses," meaning these expenses must exceed 2 percent of your adjusted gross income before you can write them off. For example, if your adjusted gross income is $100,000, you have to have $2,000 in unreimbursed employee expenses before you can start claiming a deduction.

Self-Employed

If you're self-employed, you're in much better shape. A license is a business expense so you write it off on Schedule C for self-employment income. You subtract business expenses before you write your taxable self-employment income on your 1040, so you take the deduction even if you don't itemize. When you renew your license later, that fee is a Schedule C write-off, too.

Amortizations

Not all licenses are alike. While you might need a license to sell liquor or run a radio station for your business, the IRS doesn't treat it like a doctor's license or a real-estate license. Instead, it's classed as a "section 197 intangible," which means you must amortize it, writing off the cost over 15 years. The same is true when you renew the license. If you sell the license, you pay tax on the income.

Employee Options

If you acquire your professional license working for someone else, ask your boss if he's willing to reimburse you. You can't write off any reimbursed employee expenses, but because of the 2 percent rule, you can't write them all off anyway. If you're primarily an employee but you run your own business on the side, you can write off your license on Schedule C. One example would be a military doctor who maintains a small private practice as well.

 

About the Author

Author of two film reference books, "Cyborgs, Santa Claus and Satan" and "The Wizard of Oz Catalog." Published in Air & Space, Backpacker, Newsweek, The Writer, and multiple trade journals (can fax samples if requested, don't have them available digitally)