Can you deduct tax preparation fees for your rental properties?
Part of them, yes. IRS Publication 527 says you can deduct legal and other professional expenses, such as tax return preparation fees you paid to prepare Schedule E, Part I, as a rental expense. Only the rental part counts, so ask your preparer to show it on the invoice. The fee for the rest of your return is not a rental expense.
What Publication 527 allows
IRS Publication 527 says you can deduct, as a rental expense, legal and other professional expenses such as tax return preparation fees you paid to prepare Schedule E, Part I. Schedule E, Part I is where rental income and expenses are reported, so the fee for that part qualifies.
The publication adds a second item: you can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. A preparer's fee for responding to a notice about rental income is an example. The tax and penalty themselves are not.
Which year the fee belongs to
Publication 527 gives a plain example. On your 2025 Schedule E, you can deduct fees paid in 2025 to prepare Part I of your 2024 Schedule E. The deduction follows the year you paid, not the year of the return being prepared.
Example a made-up owner pays a preparer $900 in March 2026 for the 2025 return. The invoice shows $300 for the Schedule E work on two rentals and $600 for the rest of the return. The $300 goes on the 2026 Schedule E as a professional fee. The $600 is not a rental expense.
If the owner holds the rentals in an LLC that files its own Form 1065, the partnership's preparation fee belongs to the partnership return. The paying entity and the form decide where it goes, so tell your preparer how the fee was billed.
Ask for the invoice to show the rental part
Many bills say only "tax preparation, $900." That leaves you to guess the rental share. Ask the preparer to list the Schedule E work on its own line, or to write the fee per form. A clear invoice is worth more than a long explanation in an audit. See what an IRS audit of a rental looks like.
- Keep the invoice and proof of payment together in the property's folder.
- If you have several properties, note how the rental fee is divided among them. A split by number of properties or by rental income is a reasonable approach to ask your preparer to confirm.
- Keep the preparer's letter for any notice response.
How to book it
Use a Legal and professional fees account, which maps to its own line on Schedule E. Debit it for the rental share and credit the bank that paid. If you paid from a personal account, see paying a rental bill personally.
Other fees in the same account are bookkeeping, a lawyer's review of a lease and a CPA's advice about a property. Keep them with this one so your preparer can find them in one place. Software for your books is a different question and belongs with your other operating costs. See the Schedule E category guide for where it goes.
How DoorKeeping handles it
DoorKeeping's Legal and other professional fees account maps to its Schedule E line, and the AI reads an invoice and proposes the amount, property and account so you can split a preparer's bill by what it covers. You approve the entry with one tap. At year end the CPA package lists those fees with the other expenses. DoorKeeping does not prepare returns or give tax advice.
Sources
- IRS, Publication 527, Residential Rental Property (2025), read Oct 30, 2026
Questions
- Can I deduct the whole fee for my 1040?
- Not as a rental expense. Publication 527 allows the fee for preparing Schedule E, Part I. The rest of the return is outside the rental.
- Which year do I deduct the fee?
- The year you paid it. Publication 527 says fees paid in 2025 for the 2024 Schedule E go on your 2025 Schedule E.
- Are fees to resolve a tax underpayment deductible?
- Publication 527 says expenses to resolve a tax underpayment related to rental activities are deductible, other than federal taxes and penalties.