Deducting Annual Dues Small Business

Sometimes retrieving the mail can be an adventure. I don’t know about you, but bills and advertisements to spend more money seem to flood my mailbox. Today I got my renewal notice from the AICPA. Normally I don’t think twice about paying my annual dues with the AICPA. This time the bill came at the same time my electric bill came. Because I live in Arizona and it is July, my electric bill was just over $300. Suddenly, I did not want to send in my check to renew my AICPA dues! Now, that is not to say I won’t, but it made me think, tax deduction! Remember, some of the cost comes back to you during tax season.

I do not use my 1040 to deduct membership dues. I have a PLLC with a subchapter S election, which is where my membership dues are deducted. This is because I have self employment income from performing tax services on my own. If I only had income from an employer, I would have to report my membership dues differently. I would have to use schedule A. Reporting the dues on my business return is little more advantageous than using schedule A because the deduction is above the line (reduces my adjusted gross income [AGI]).

If you don’t have this ability and all your work is through an employer, don’t stop reading. Notice I just mentioned schedule A. That is where you itemize your deductions and get a big reduction after your AGI is calculated. Most people think of it as the place where their medical, mortgage interest, RE taxes and charitable deductions are reported.

The biggest downfall to using schedule A with unreimbursed business expenses is that the sum of all your deductions in this area of the form must exceed 2% of your AGI, and only the excess is deductible.

So you also have membership dues? These costs that are applicable to your job are not reimbursed? Keep those receipts, some of it, if not all of it may be deductible. See my Guide to Itemizing if you want to get more in-depth.

Example: If your AGI is $100,000, than the excess over $2,000 dollars in the miscellaneous itemized deduction category is what will be deductible.

Under the miscellaneous itemized deductions section of schedule A, some of the following may be deductible for you (Not Limited To):

• Professional and Union Dues
• Continuing Education
• Books, Magazines and Journals
• Small tools and supplies
• Meals and Entertainment – 50%
• Travel Expenses
• Home Office Expense – Ask your tax preparer about this one, it is a high audit area and has lots of criteria to meet deductibility. Home office deductions are reported on Form 8829.
• Uniforms are general NOT deductible but in some rare situations they may be.

All of these items must be related to your employment and unreimbursed by your employer. Form 2106 is often used, especially for vehicle related expenses. See the Form 2106 instructions and check out the flowchart to see if you are required to use this form.