Yes — but it depends on who pays the fee, what type of fee it is, and where it gets reported. Under federal tax law, some administration fees are fully deductible, some are partially deductible, and others lost their deduction entirely after 2017. The Tax Cuts and Jobs Act (TCJA) eliminated the miscellaneous itemized deduction that individuals once used to write off investment advisory fees, tax preparation costs, and other administrative expenses.
IRC §67(g) suspended all miscellaneous itemized deductions — those subject to the old 2% of adjusted gross income (AGI) floor — for tax years 2018 through 2025. According to the IRS, roughly 11 million taxpayers claimed these deductions before the TCJA went into effect. The One Big Beautiful Bill Act of 2025 made this elimination permanent, meaning these deductions will never return for individuals.
Here’s what you’ll learn in this article:
- 📋 Which administration fees are still deductible and which ones are gone for good
- 💰 How estates and trusts keep their deductions through a special IRC §67(e) carve-out
- 🏢 How business owners deduct admin fees on Schedule C that employees cannot
- ⚠️ The most common mistakes people make when claiming these deductions
- 🔑 Specific steps to protect your deductions and avoid IRS penalties
What “Administration Fees” Mean Under Federal Tax Law
The term “administration fees” covers a wide range of costs. It is not a single line item in the tax code. The IRS treats these fees differently depending on the context — whether they come from a business, a trust, a retirement account, or a personal investment account.
Business administration fees include costs like bookkeeping, payroll processing, legal services, and professional consulting fees that keep a company running. These fall under “ordinary and necessary” business expenses described in IRC §162. Self-employed individuals and sole proprietors report them on Schedule C of Form 1040.
Estate and trust administration fees include trustee compensation, attorney fees, probate court costs, appraisal fees, and fiduciary expenses related to managing assets held inside a trust or estate. These get reported on Form 1041 — the income tax return for estates and trusts.
Investment administration fees include charges from financial advisors, custodial fees for brokerage accounts, and fees for managing a personal portfolio. Before 2018, individuals could deduct these as miscellaneous itemized deductions on Schedule A — but not anymore.
Retirement account administration fees include annual custodian charges, recordkeeping costs, and plan management fees inside a 401(k), IRA, or similar retirement plan. The IRS allows plans to deduct these fees directly from the account balance, but the account holder cannot claim a personal tax deduction for them.
| Fee Type | Where It’s Reported |
|---|---|
| Business admin fees | Schedule C (Form 1040) |
| Estate/trust admin fees | Form 1041 |
| Investment advisory fees (individual) | No longer deductible |
| Retirement account fees | Deducted inside the account |
How the Tax Cuts and Jobs Act Gutted Individual Deductions
Before 2018, any taxpayer who itemized deductions could claim administration-related costs as miscellaneous itemized deductions on Schedule A. The catch was a floor: you could only deduct the portion of those expenses that exceeded 2% of your AGI. If your AGI was $100,000 and you paid $4,000 in advisory fees, you could deduct $2,000.
The TCJA changed this by adding Section 67(g) to the tax code, which suspended all miscellaneous itemized deductions for tax years 2018 through 2025. The law was scheduled to expire after 2025, which gave some taxpayers hope.
That hope ended in 2025. The One Big Beautiful Bill Act made the elimination of miscellaneous itemized deductions permanent for individuals. Unreimbursed employee expenses, tax preparation fees paid for personal returns, financial advisor fees, and hobby expenses are gone — they will not come back.
What the 2% AGI Floor Used to Allow
| Deductible Before 2018 | Status After TCJA |
|---|---|
| Financial advisor fees | Permanently eliminated |
| Personal tax preparation fees | Permanently eliminated |
| Unreimbursed employee expenses | Permanently eliminated |
| Hobby expenses | Permanently eliminated |
| Custodial fees (individual accounts) | Permanently eliminated |
| Safe deposit box rental | Permanently eliminated |
This means if you are a W-2 employee who pays out-of-pocket for professional development courses, tax software for your personal return, or fees to a financial planner — you get no deduction. The loss is permanent under current federal law.
Why Business Owners Still Deduct Administration Fees
Self-employed individuals and sole proprietors operate under a completely different set of rules than employees. IRC §162 allows any “ordinary and necessary” business expense to be deducted against business income. The TCJA did not touch this section of the tax code.
A business administration fee qualifies as deductible on Schedule C if it meets two tests. The expense must be ordinary — meaning it is common and accepted in your industry. It must also be necessary — meaning it is helpful and appropriate for your business. An expense does not need to be required to pass the “necessary” test.
Specific Business Admin Fees You Can Deduct
Bookkeeping and accounting fees are deductible on Line 17 of Schedule C under “Legal and professional services.” This includes payments to a CPA, bookkeeper, or tax professional who prepares your business return. The IRS confirmed in Revenue Ruling 92-29 that the portion of your tax prep fee allocable to your Schedule C business is an above-the-line deduction.
Payroll processing fees from services like ADP, Gusto, or QuickBooks Payroll count as ordinary business expenses. You deduct these on Schedule C just like any other business administration cost. The same applies to HR software, time-tracking tools, and employee management platforms.
Legal and consulting fees related to your business are deductible. If you hire a lawyer to review a contract, a consultant to improve operations, or a business coach for management guidance, those costs go on Schedule C. The fees must connect directly to your trade or business — personal legal fees do not qualify.
Business licensing and regulatory fees — including annual state business registration renewals, professional license fees, and permits — are deductible. These costs are “ordinary and necessary” because the government requires them to operate legally.
| Business Admin Fee | Schedule C Line |
|---|---|
| Accounting and bookkeeping | Line 17 |
| Legal and professional services | Line 17 |
| Office administration expenses | Line 18 |
| Rent for office or coworking space | Line 20b |
| Tax preparation (business portion) | Line 17 |
| Business software subscriptions | Line 27a (Other) |
Tax Prep Fees: The Business vs. Personal Split
The IRS confirmed in Rev. Rul. 92-29 that Schedule C filers may deduct tax preparation expenses that relate to the business portion of their return. If you pay $1,000 to a CPA and $600 of the work is for your Schedule C business, you deduct $600 as a business expense. The remaining $400 attributable to your personal Form 1040 is not deductible.
This rule also applies to tax filing software costs. If you purchase software to prepare your business taxes, the cost is deductible. If you use the same software for personal and business returns, you allocate the cost and deduct only the business portion.
The Estate and Trust Exception That Survived the TCJA
IRC §67(e)(1) creates one of the most important exceptions in tax law for administration fees. Estates and nongrantor trusts still deduct certain administration costs — even though the TCJA wiped out miscellaneous itemized deductions for everyone else.
The rule is specific: costs “paid or incurred in connection with the administration of the estate or trust” are deductible if those costs would not have been incurred if the property were not held in a trust or estate. These deductions are taken “above the line” in computing the trust or estate’s AGI on Form 1041. They are not classified as miscellaneous itemized deductions, which means Section 67(g) does not eliminate them.
IRS Notice 2018-61: The Clarification That Calmed the Storm
When the TCJA passed in December 2017, fiduciaries and estate planners panicked. The law’s broad language about eliminating miscellaneous itemized deductions created confusion about whether trust administration costs were also gone. On July 13, 2018, the IRS released Notice 2018-61 to end the uncertainty.
Notice 2018-61 confirmed that the IRS would issue regulations preserving the deductibility of administration expenses unique to estates and nongrantor trusts. The IRS followed through in September 2020 by issuing final regulations under TD 9918, which affirmed that Section 67(e) deductions are not itemized deductions under Section 63(d), not miscellaneous deductions under Section 67(b), and are not disallowed under Section 67(g).
Estate Fees That Pass the Deductibility Test
Treasury Regulation §1.67-4 outlines the types of costs that estates and trusts can still deduct. The critical question is whether the expense is “commonly or customarily” incurred by individuals. If it is not something a regular person would pay, it qualifies as a trust-specific deduction.
| Deductible Estate/Trust Admin Fee | Why It Qualifies |
|---|---|
| Trustee or executor compensation | Only trusts/estates pay trustees |
| Probate court filing costs | Individuals do not go through probate |
| Attorney fees for trust administration | Unique to fiduciary management |
| Tax prep fees for Form 1041 | Individuals file Form 1040, not 1041 |
| Appraisal fees for estate assets | Required for estate/trust valuation |
| Fiduciary travel reimbursements | Tied to administering the estate |
Expenses that a regular person would also incur — such as homeowners association fees, property insurance, and routine maintenance — are not deductible under this exception. The IRS treats those as ownership costs that anyone would pay, regardless of whether the property sits inside a trust.
The Knight v. Commissioner Ruling and Investment Advisory Fees in Trusts
The U.S. Supreme Court’s 2008 decision in Knight v. Commissioner addressed whether investment advisory fees paid by a trust could avoid the 2% AGI floor. The Court held that trust investment advisory fees are subject to the 2% floor unless the fees would not have been incurred if the assets were held outside of a trust.
Under the TCJA, this distinction matters even more. Because the 2% floor deductions are now fully eliminated, investment advisory fees paid by a trust are no longer deductible at all — unless the trustee can prove the fees are unique to trust administration. A trust that hires a specialized fiduciary investment manager because the trust document requires it has a stronger argument for deductibility than a trust that simply uses the same advisor the grantor used personally.
What Happens to Excess Deductions When a Trust Terminates
In the final year of an estate or trust, deductions sometimes exceed gross income. IRC §642(h)(2) allows these excess deductions to pass through to the beneficiaries who receive the remaining property. This creates a unique planning opportunity.
The final regulations under TD 9918 place excess deductions into three categories:
- Above-the-line deductions — These retain their character and reduce the beneficiary’s AGI directly. Section 67(e) administration costs fall here.
- Non-miscellaneous itemized deductions — These include state and local taxes, which are subject to the $10,000 SALT cap for individuals.
- Miscellaneous itemized deductions — These are not deductible by the individual beneficiary because the TCJA suspension applies.
A beneficiary who receives a final Schedule K-1 from a terminating trust may receive above-the-line deductions that reduce their personal AGI. The regulations confirm that amended returns for 2018 and 2019 may be filed to take advantage of these rules retroactively.
Retirement Account Admin Fees: A Different Animal Entirely
Fees inside a 401(k), IRA, or other retirement plan work on their own set of rules. The IRS allows plan administration fees and investment fees to be deducted directly from the participant’s account balance. This happens either as a direct charge or as a reduction in the account’s investment returns.
Before the TCJA, a taxpayer who paid IRA custodian fees out of pocket — from a separate taxable account — could deduct those fees as a miscellaneous itemized deduction. The IRS supported this position in Private Letter Ruling 201104061, which confirmed that ongoing advisory fees paid with outside taxable dollars qualified as Section 212 expenses.
That deduction is now gone for individual taxpayers. If you pay your IRA’s custodian fee out of pocket, you receive no tax benefit. The smarter move is to let the fee come directly out of the retirement account, where it is paid with pre-tax dollars that were never taxed in the first place.
Paying Fees Inside vs. Outside Your Retirement Account
| Payment Method | Tax Effect |
|---|---|
| Fee paid from inside a pre-tax IRA/401(k) | Paid with pre-tax dollars; no deduction needed |
| Fee paid from inside a Roth IRA | Reduces tax-free growth; no deduction available |
| Fee paid out of pocket (taxable funds) | No deduction — TCJA eliminated it |
There is an important Roth IRA nuance. Paying fees from inside a Roth account reduces the amount of money growing tax-free. Since Roth withdrawals are tax-free in retirement, every dollar used to pay fees inside a Roth is a dollar that will never generate tax-free income. Paying Roth fees with outside money — even without a deduction — may preserve more long-term wealth.
Three Real-World Scenarios That Show How This Works
Scenario 1: Maria the Freelance Graphic Designer
Maria runs a freelance design business and files Schedule C. She pays $2,400 per year for bookkeeping software, $1,500 to a CPA for her business tax return, and $600 for a business license renewal. All of these costs are ordinary and necessary business expenses under IRC §162.
| Expense | Deductible Amount |
|---|---|
| Bookkeeping software | $2,400 |
| CPA fee (business portion) | $1,500 |
| Business license renewal | $600 |
| Total Schedule C deduction | $4,500 |
Maria’s CPA charges $2,000 total — $1,500 for the Schedule C portion and $500 for her personal Form 1040. Maria can only deduct the $1,500 business-related portion. The $500 personal portion is not deductible because the TCJA eliminated that category of deduction.
Scenario 2: David the Estate Executor
David serves as executor of his late father’s estate. The estate pays $8,000 in attorney fees for probate, $3,500 in trustee compensation to David, $1,200 for an appraisal of real estate assets, and $2,000 to a CPA for preparing the estate’s Form 1041. These expenses are deductible on Form 1041 under IRC §67(e) because they would not exist if the estate did not exist.
| Estate Expense | Deductible Amount |
|---|---|
| Probate attorney fees | $8,000 |
| Executor compensation | $3,500 |
| Real estate appraisal | $1,200 |
| Form 1041 tax preparation | $2,000 |
| Total Form 1041 deduction | $14,700 |
The estate also pays $4,000 to a financial advisor who manages the estate’s investment portfolio. This fee is not deductible because investment advisory fees are classified as miscellaneous itemized deductions — which the TCJA eliminated even for estates and trusts.
Scenario 3: Lisa the Retired Investor
Lisa is retired and pays $5,000 annually to a financial advisor who manages her personal brokerage account. She also pays a $150 custodian fee for her traditional IRA. Before 2018, Lisa could deduct the amount of these fees that exceeded 2% of her AGI on Schedule A.
| Fee | Deductible? |
|---|---|
| $5,000 financial advisor fee (personal account) | No — permanently eliminated |
| $150 IRA custodian fee (paid out of pocket) | No — permanently eliminated |
| $150 IRA custodian fee (paid from IRA) | Not deductible, but paid with pre-tax dollars |
Lisa’s best option is to let the IRA custodian fee come out of her traditional IRA, where it gets paid with money that was never taxed. For the $5,000 advisory fee on her personal account, there is no tax benefit available — she must absorb this as an after-tax cost.
Costly Mistakes to Avoid With Administration Fee Deductions
Claiming Personal Advisory Fees on Schedule A
Some taxpayers still try to deduct investment advisory fees or personal tax prep costs on Schedule A. The IRS will disallow this deduction and may assess penalties. These miscellaneous itemized deductions have been permanently eliminated under federal law. Filing them can trigger an IRS notice or audit.
Mixing Business and Personal Expenses on Schedule C
Sole proprietors sometimes deduct all of their tax preparation fees on Schedule C — including the portion related to their personal return. The IRS expects you to allocate the cost between business and personal portions. Deducting the personal portion on Schedule C inflates your business deductions and can lead to penalties.
Assuming All Trust Fees Are Deductible
Not every expense a trust pays is deductible under IRC §67(e). Investment advisory fees, property insurance, and HOA dues are costs that anyone would pay, whether or not a trust holds the asset. The IRS applies the “commonly or customarily” test from Treasury Regulation §1.67-4 to determine if an expense is unique to trust administration.
Paying Roth IRA Fees From Inside the Account
Every dollar that leaves a Roth IRA to pay administrative fees is a dollar that will never grow tax-free. Paying Roth fees with outside money preserves the account’s tax-free compounding, even if you cannot deduct the out-of-pocket payment. This mistake costs retirees thousands of dollars in lost growth over decades.
Ignoring State-Level Deduction Rules
Several states did not conform to the TCJA’s elimination of miscellaneous itemized deductions. Taxpayers in those states may still deduct certain administration fees on their state return — even if the federal deduction is gone. Failing to research your state’s rules means leaving money on the table.
Do’s and Don’ts for Claiming Administration Fee Deductions
| Do ✅ | Don’t ❌ |
|---|---|
| Do deduct business admin fees on Schedule C — IRC §162 still allows all ordinary and necessary expenses | Don’t claim personal advisory fees on Schedule A — the deduction is permanently gone |
| Do ensure your trust deducts fiduciary fees on Form 1041 under the IRC §67(e) exception | Don’t assume investment advisory fees inside a trust are deductible — they are not unless unique to trust administration |
| Do allocate tax prep fees between business and personal portions | Don’t deduct 100% of your CPA bill on Schedule C if part relates to your personal return |
| Do let traditional IRA/401(k) fees come from inside the account to use pre-tax dollars | Don’t pay Roth IRA fees from inside the account — it destroys tax-free growth |
| Do check your state’s tax rules for possible state-level deductions | Don’t assume federal rules are the same as your state’s rules |
| Do keep detailed records and receipts for every administration fee you deduct | Don’t estimate or round up fees without documentation — the IRS requires proof |
| Do consult a tax professional if you manage an estate or trust | Don’t try to prepare Form 1041 without understanding the §67(e) rules |
The Pros and Cons of Different Fee Payment Strategies
| Pros ✅ | Cons ❌ |
|---|---|
| Business admin fees remain fully deductible on Schedule C, reducing self-employment income and tax | Self-employed taxpayers bear the full cost of compliance and record-keeping |
| Estate/trust admin fees survive the TCJA through the IRC §67(e) carve-out | The “commonly or customarily” test creates gray areas and audit risk |
| Paying traditional IRA fees from inside the account uses pre-tax dollars | Paying from inside a Roth IRA reduces tax-free growth permanently |
| Some states still allow miscellaneous itemized deductions | State rules vary widely and change frequently, adding complexity |
| Excess deductions from terminated trusts pass to beneficiaries above the line | Miscellaneous deductions that pass through are still non-deductible by the beneficiary |
| Allocating CPA fees between business and personal maximizes deductions | Improper allocation risks IRS scrutiny and penalties |
How State Tax Rules Create Extra Opportunities
Federal law sets the baseline, but your state may offer deductions that Washington, D.C., took away. Several states decoupled from the TCJA’s changes to miscellaneous itemized deductions. This means administration fees that are not deductible on your federal return might still reduce your state tax bill.
States that maintained their own itemized deduction rules — including some that still reference pre-2018 federal code — may allow deductions for investment advisory fees, personal tax preparation costs, and other admin fees. The rules vary by state and change from year to year. Taxpayers in California, New York, Minnesota, and New Jersey should pay close attention to their state Schedule A instructions.
If you live in a state that does conform fully to the TCJA, you get no state-level deduction for these fees either. Checking your state’s conformity status with federal tax law is an essential step before filing.
Key IRS Forms and Where Each Fee Gets Reported
| IRS Form | Who Files It | Admin Fees Reported |
|---|---|---|
| Schedule C (Form 1040) | Self-employed individuals, sole proprietors | Business admin fees, business tax prep, professional services |
| Schedule A (Form 1040) | Individual itemizers | No longer available for miscellaneous admin fees |
| Form 1041 | Estates and nongrantor trusts | Fiduciary fees, probate costs, trust tax prep, attorney fees |
| Schedule K-1 (Form 1041) | Beneficiaries of estates/trusts | Excess deductions passed from terminated trusts |
| Form 5500 | Retirement plan administrators | Plan-level administration and compliance fees |
Self-employed filers claim administration costs on Schedule C, Line 17 for legal and professional services or Line 27a for other expenses not listed elsewhere. The key is matching each expense to the correct line and keeping documentation that proves the expense is ordinary and necessary.
Estates and trusts report deductible administration expenses on Form 1041 as above-the-line deductions. The fiduciary — the executor or trustee — is responsible for determining which expenses meet the §67(e) test. Errors on Form 1041 can result in tax deficiencies passed down to beneficiaries.
The IRC §67(e) “Would Not Have Been Incurred” Test — Step by Step
The IRS uses a specific standard to decide if an estate or trust expense qualifies for the §67(e) deduction. Treasury Regulation §1.67-4 calls it the “commonly or customarily” test: would a hypothetical individual who owned the same property outside of a trust have commonly incurred the same cost?
Step 1: Identify the expense. Is it a trustee fee, attorney fee, tax prep fee, or something else?
Step 2: Ask: would a regular person who owns similar assets outside of a trust pay for this same service? If the answer is no, the expense is deductible. Trustee compensation, probate filing fees, and Form 1041 tax preparation are expenses that only exist because the trust exists.
Step 3: If the answer is yes — a regular person would pay for this — the expense fails the test. Property insurance, lawn care, HOA fees, and routine maintenance are ownership costs that anyone would pay, trust or no trust. These are not deductible under §67(e).
Step 4: For expenses that fall in a gray area — like bundled trustee fees that cover both administrative and investment management services — the IRS requires unbundling. The trust must allocate the fee between the deductible administrative portion and the non-deductible investment portion. Failure to unbundle results in the entire fee being treated as subject to the (now eliminated) 2% floor.
What the One Big Beautiful Bill Act Changed Permanently
The 2025 legislation made several TCJA provisions permanent that were set to expire. For administration fees, the most important change is this: the elimination of miscellaneous itemized deductions is no longer temporary. There is no sunset date. Individual taxpayers will never again deduct investment advisory fees, personal tax preparation fees, or unreimbursed employee expenses on Schedule A.
The One Big Beautiful Bill Act also made the 20% Qualified Business Income (QBI) deduction under IRC §199A permanent. This benefits trust and estate fiduciaries because some trusts with qualified business income can claim this deduction. Trustee fees and executor compensation paid to the fiduciary may also qualify for the pass-through deduction in certain circumstances.
The SALT deduction cap was raised from $10,000 to $40,000 through 2029, which affects estates and trusts that pay state and local taxes. This does not directly change the deductibility of administration fees, but it increases the total amount of itemized deductions available to trusts that pay property or income taxes.
FAQs
Are financial advisor fees tax deductible?
No. The TCJA permanently eliminated the miscellaneous itemized deduction for financial advisor fees paid by individuals. Business owners may deduct advisory fees related to their business on Schedule C.
Are trust administration fees deductible after the TCJA?
Yes. IRC §67(e) still allows estates and nongrantor trusts to deduct administration costs that would not exist outside of a trust, including trustee fees, probate costs, and Form 1041 tax prep.
Can I deduct IRA custodian fees on my tax return?
No. Individual taxpayers can no longer deduct IRA custodian fees paid out of pocket. Letting the fee come from inside a pre-tax account allows it to be paid with pre-tax dollars.
Are business administration fees deductible on Schedule C?
Yes. Self-employed individuals deduct ordinary and necessary business admin expenses on Schedule C, including accounting, legal, licensing, and professional service fees.
Will the miscellaneous itemized deduction ever come back?
No. The One Big Beautiful Bill Act of 2025 made the elimination permanent. There is no sunset provision, and Congress would need to pass new legislation to restore it.
Are executor fees taxable income?
Yes. Executor compensation is taxable income to the executor. The estate deducts it as an administration expense on Form 1041, but the executor must report it on their personal return.
Can I deduct tax preparation fees for my personal return?
No. Personal tax preparation fees are a miscellaneous itemized deduction that has been permanently eliminated. Only the business-related portion of tax prep costs remains deductible on Schedule C.
Do estates still get a personal exemption?
Yes. Estates and trusts retain their personal exemptions under IRC §642(b), even though individual personal exemptions were eliminated. The amounts are $100, $300, or $600 depending on the entity type.
Can excess trust deductions pass to beneficiaries?
Yes. When an estate or trust terminates, excess deductions pass to beneficiaries under IRC §642(h)(2). Above-the-line deductions retain their character and reduce the beneficiary’s AGI.
Are HOA fees deductible for a trust that holds property?
No. HOA fees are ownership costs incurred by anyone who holds property, trust or not. They fail the “commonly or customarily” test and are not deductible under IRC §67(e).
Related reading
- Which Trust Expenses Are Really Tax Deductable? – Avoid This Mistake + FAQs
- Are 401(k) Fees Really Tax Deductible? – Avoid This Mistake + FAQs
- How Do I Deduct Unreimbursed Employee Expenses? + FAQs
- Can You Deduct Financial Advisor Fees? + FAQs
- Are Trustee Fees Deductible on 1041? (w/Examples) + FAQs
- Are Investment Expenses Deductible on Form 1041? (w/Examples) + FAQs
- What Expenses Can An S-Corp Deduct? + FAQs