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On Form 1040 Schedule C - "Profit or Loss From Business (Sole Proprietorship)" , the instructions for line 23 ("taxes and licenses" under "Expenses") have a list of what taxes can and cannot be deducted as expenses. But I can't seem to find an exact match there for an annual state tax (on a disregarded-entity single-owner LLC), neither in the "you can deduct" nor in the "do not deduct" lists. (For example this annual state tax - scroll to the "LLC/Partnership Tax Information" heading.)

So can an annual tax on an LLC be deducted in Schedule C as an expense, or not?

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  • Just to be clear, you're referring to a "fee" - they indeed name it a "tax" in that document, but for anyone reading it's a "flat fee". It's not a "state tax" as that phrase is typically used (for example, "Texas has no state tax" or "you pay 7% of your income as state income tax to the state in my state" and so on).
    – Fattie
    Commented Feb 22, 2021 at 15:01

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The LLC tax falls into the "you can deduct" IRS category here:

Licenses and regulatory fees for your trade or business paid each year to state or local governments.

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