[Rpk11]

Are state and local taxes paid on behalf of the business deductible on Schedule C?

In the Becker textbook, on page R1-28, it lists “State and local business taxes paid” as an Expense on Schedule C.

However, on #11 in Testlet 2 of the second Becker Practice Exam, in the explanation of the answer it says “State income taxes for the business” are not deductible on Schedule C (itemized deduction).

I’m confused. Does this mean that you can deduct state/local taxes business taxes (i.e. property), but not state/local income taxes?

I take REG tomorrow, so any help is greatly appreciated.

[littlenumberrobot]

Exactly. Business licenses and other state/local/property taxes can be deducted on Sch C. All State/Local INCOME taxes go to Sch A(itemized).

CA CPA - All because of the journey listed below
-----------------------------------------------------------------------
FAR - 53('10), 8/25/12 79 PASSED!
REG - 66('11), 69('12), 12/06/12 77 PASSED!!
BEC - 58('10), 74('12), 01/05/13 77 PASSED!!!
AUD - 43('11), 66('12), 69('13), 74('13) 7/29/13 85 PASSED!!!!!

(Combinations of Roger, Yaeger, Wiley Book, Wiley TB, & NINJA Notes)

Ethics 90%

[Resacups]

The key to the question is business taxes v. income taxes. When you have schedule C income, you may deduct business taxes, i.e. business license, secretary of state fees, etc. However, and state and local INCOME taxes will be deducted on schedule A of the 1040

BEC: 01/09/12 PASSED
AUD: 05/29/12 PASSED
REG: 07/19/12 PASSED
FAR: 11/12/12 PASSED

[thetalambda2002]

The point is if you have a schedule C your business activity is reported on your personal return. If you business building is owned by the business, then you can deduct the taxes on schedule C same with licenses, tangible property taxes, etc. Taxes on your business income, on the other hand, are combined with all your other personal income taxes for federal, state, and local income taxes. They are not deductible for the schedule C.

BEC - 77
AUD - 83
REG - 76
FARS - 74, 84

[Author]

Replies