Referral fees you pay belongs on Line 10, commissions and fees.
Why line 10
A fee you pay someone for sending you a paying client is a commission, which is the first half of what line 10 is named for. It is deductible whether the recipient is a business or an individual, as long as it is paid for business reasons and is not a payment that state or federal law makes illegal. If the same person also did work on the engagement, split the payment: the finder's part is line 10 and the labour part is contract labor on line 11.
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 referral fees you pay lands on Line 10 without you sorting it.
Start for freeWhat referral fees you pay is confused with
- Line 8, advertising
- Pay tied to an actual closed sale is a commission on line 10; a flat payment for a lead list or placement with no sale attached is advertising on line 8.
- Line 11, contract labor
- If the payee delivered services rather than just an introduction, that portion is contract labor on line 11.
- not deductible, not deductible
- A referral payment that is illegal under state or federal law, including kickbacks in regulated fields, is not deductible at all.
Examples that belong on line 10
- 500 dollars to a web designer who sent you a branding client
- 10 percent of first-year fees paid to another practitioner for a referred client
- A 250 dollar finder's fee to a contractor who passed on a kitchen job
- A flat 100 dollars per booked consultation paid to a partner studio
- A 1,000 dollar fee to a broker who introduced a wholesale account
What does not belong here
- A gift card or present given as a thank-you, which falls under the 25 dollar business gift cap
- Payments to a referrer you cannot name or document
- A discount you give the customer instead, which reduces gross receipts rather than being an expense
- Illegal kickbacks or payments made to get a public contract improperly
The limit that applies
For payments made in 2026 and later, Form 1099-NEC is required at 2,000 dollars or more per payee for the year, up from 600 dollars for earlier years. The deduction does not depend on whether you filed it.
What to keep
Keep the written referral arrangement or email trail, the invoice or receipt, and a Form W-9 with the payee's name, address and taxpayer identification number. Without the W-9 you cannot file the information return the payment may require.
Other expenses on line 10
| Expense | Line |
|---|---|
| a real estate commission split | Schedule C, Line 10 |
| Amazon seller fees | Schedule C, Line 10 |
| App Store and Google Play commission | Schedule C, Line 10 |
| Etsy fees | Schedule C, Line 10 |
| pay-per-lead fees from Thumbtack, Angi or Yelp | Schedule C, Line 10 |
| PayPal fees | Schedule C, Line 10 |
| sales commissions you pay | Schedule C, Line 10 |
| Shopify transaction fees | Schedule C, Line 10 |
| Square fees | Schedule C, Line 10 |
| Stripe processing fees | Schedule C, Line 10 |
| Upwork and Fiverr platform fees | Schedule C, Line 10 |
Related lookups
- Where does Google Ads spend go on Schedule C?
- Where do subcontractors go on Schedule C?
- Is a car payment deductible 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 referral fees you pay lands on Line 10 without you sorting it.
Start for free