A city or county business license belongs on Line 23, taxes and licenses.
Why line 23
Line 23 takes licenses and regulatory fees for your trade paid each year to state or local governments, which is precisely what a city or county business license is. The annual nature is what matters: a fee you pay over and over to stay allowed to operate is a current expense in the year paid. A one off fee that buys something with a life of years is treated as a cost of that right instead and is amortised.
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 city or county business license lands on Line 23 without you sorting it.
Start for freeWhat a city or county business license is confused with
- Line 17, legal and professional services
- The government fee itself is line 23, while an attorney's charge for preparing the application is legal and professional services on line 17.
- Form 4562, form 4562, carried to schedule c line 13
- An annual license is line 23, but a license or permit with a useful life beyond a year that you buy as an asset is amortised and reaches the return through Form 4562.
- not deductible, not deductible
- A penalty for operating without the license is a fine paid to a government and is not deductible at all.
Examples that belong on line 23
- A $75 annual city business license renewal
- A $120 county general business tax certificate
- A $250 health permit for a food business, renewed yearly
- A $45 home occupation permit for a licensed trade
- A $300 contractor registration renewal with a state board
What does not belong here
- A penalty for late renewal, which is not deductible.
- Legal fees for setting up the entity, which are line 17 or a start up cost.
- A license for a trade you do not carry on.
- A personal hobby permit.
What to keep
Keep the license certificate and the payment receipt showing the issuing authority and the period covered. The period on the certificate is what puts the cost in the right year.
Other expenses on line 23
| Expense | Line |
|---|---|
| a state franchise tax or LLC annual fee | 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
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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 city or county business license lands on Line 23 without you sorting it.
Start for free