A state franchise tax or LLC annual fee belongs on Line 23, taxes and licenses.
Why line 23
A state franchise tax or annual LLC fee is a cost of being allowed to operate in that state, so a single member LLC filing on Schedule C deducts it on line 23. The annual report or statement of information fee goes in the same place. None of this is federal income tax, which is the distinction that keeps it deductible.
Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so a state franchise tax or LLC annual fee lands on Line 23 without you sorting it.
Start for freeWhat a state franchise tax or LLC annual fee is confused with
- Line 17, legal and professional services
- The state fee is line 23, while the registered agent's charge and any attorney's fee for filing are line 17.
- not deductible, not deductible
- A penalty for filing the annual report late is a government penalty and is not deductible even though the fee itself is.
- Schedule A, schedule a, personal itemised deduction
- A state tax measured on your net income is a personal itemised deduction on Schedule A, while a flat franchise or privilege tax for operating is line 23.
Examples that belong on line 23
- An $800 California LLC annual tax
- A $300 Delaware LLC annual franchise tax
- A $138 Texas franchise tax report filing cost where tax is due
- A $20 state annual report fee
- A $125 biennial statement filing fee
What does not belong here
- A late filing penalty on the annual report.
- The registered agent's fee, which is line 17.
- Entity formation legal fees, which are a start up cost.
- A state tax computed on business net income, which is a Schedule A item.
What to keep
Keep the state's assessment or online payment confirmation naming the entity and the year. Keep the fee separate from the registered agent invoice, because the two land on different lines.
Other expenses on line 23
| Expense | Line |
|---|---|
| a city or county business license | Schedule C, Line 23 |
| a state professional license renewal | Schedule C, Line 23 |
| employer payroll taxes and the employer half of FICA | Schedule C, Line 23 |
| federal and state unemployment tax | Schedule C, Line 23 |
| personal property tax on business equipment | Schedule C, Line 23 |
| real estate property tax on a business building | Schedule C, Line 23 |
| sales tax you collected and remitted | Schedule C, Line 23 |
Related lookups
- Where do tax preparation fees go on Sch C?
- Is a car payment deductible on Schedule C?
- Where does state income tax go on Schedule C?
Sources
This page explains how Schedule C lines work. It is general information, not tax advice for your situation. If an expense is large or the answer turns on a fact about your business, confirm it with your tax preparer.
Looking for a different expense? The full Schedule C line lookup has every line from 8 to 27 with the expenses that belong on each, and Schedule C expense categories walks the whole form in order.
Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so a state franchise tax or LLC annual fee lands on Line 23 without you sorting it.
Start for free