Can I Deduct a Business License Fee?

Most businesses are required to obtain and renew licenses to operate, and those fees are straightforward business deductions. License fees required by a government entity to operate your business, including city business licenses, state operating permits, and industry-specific licenses, are deductible as ordinary business expenses. Annual renewal fees are also fully deductible in the year they are paid. Initial setup fees paid when you first form your business may fall under the startup cost rules, which limit first-year deductions if total startup costs exceed a certain amount. Keep copies of your license receipts as part of your business records.