Are trademark fees and costs tax-deductible? Can you write off trademark expenses?

Yes! Trademark application fees and other trademark fees are tax deductible. They are a legitimate business expense and both trademark fees and trademark filings costs are tax-deductible from revenue made by the trademark owner.

If your business owns trademarks or service marks and incurs costs related to them, many of those trademark fees and expenses may be eligible for tax deductions.

What is a tax write-off?

Governments allow tax write-offs or tax deductions for a few key reasons:

1. To incentivize certain behaviors or activities that are seen as beneficial for the economy or society. For example:

• Deductions for contributions to retirement accounts encourage people to save for retirement, reducing future burden on government programs.
• Deductions for charitable donations incentivize charitable giving to non-profit organizations.
• Deductions for business expenses and investments encourage business activity, innovation and job creation.

2. To account for actual expenses incurred in earning income. Tax deductions help ensure that only net income (gross income minus allowable expenses) is subject to tax. This is based on the principle that only profits should be taxed, not gross revenues before expenses are deducted.
3. To promote fairness and progressivity in the tax system. Deductions like the standard deduction, personal exemptions, etc. help ensure those with lower incomes pay less tax as a percentage of their income than higher income groups.
4. For administrative simplicity. Some deductions, like deductions for home mortgage interest, while benefiting homeowners, also make calculating taxes simpler for millions of filers.
5. Due to political influence from interest groups lobbying for certain tax benefits for their members or industry. Many tax deductions persist due to effective lobbying over the years.

However, tax deductions also reduce government revenue. Their economic benefits have to be weighed against higher deficits/debt levels or the need for higher tax rates.

What if my trademark is in my own name, can I write off the expenses?

Yes, if a trademark is registered in your own personal name, you can generally write off the related expenses as deductions when filing your individual income tax return. Here are some key points about deducting trademark expenses as an individual:

1. Qualifying Expenses - Expenses that can potentially be deducted include the trademark application fees, legal fees for trademark attorneys, costs of trademark searches, maintenance fees, and any other costs directly related to obtaining and maintaining the trademark registration.
2. Must be Related to a Business/Income Activity - In order to deduct the expenses, the trademark must be used in connection with a business, trade, or profit-seeking activity that produces taxable income. Merely registering a personal name trademark without business income would not qualify.
3. Categorizing the Deduction - Trademark expenses are typically deducted as miscellaneous itemized deductions on Schedule A of the individual tax return. They are subject to a 2% of adjusted gross income (AGI) floor.
4. Limitations - Through 2025, miscellaneous itemized deductions are suspended for individuals under the Tax Cuts and Jobs Act. However, they can still be deducted if related to a business activity by filing Schedule C.
5. Depreciating over 15 Years - The trademark registration fees and legal costs can potentially be treated as depreciable intangible assets and written off over 15 years under IRS rules.

If the trademark is held by your personal service corporation or other business entity, then the expenses would be deductible as normal business expenses on the relevant business tax return.

What trademark fees can be deducted from taxes?

Here are some key details on the tax deductibility of trademark fees:

Legal and Filing Fees Any fees paid to attorneys or the USPTO for legal work and official filing of a trademark application, renewal for registered trademarks, assignment, etc. are typically tax deductible as ordinary and necessary business expenses.

Trademark Maintenance Fees The fees required every 5-10 years between the 5th and 10th year anniversaries to maintain an existing trademark registration are deductible business expenses.

Trademark Search Costs Fees paid to have a comprehensive trademark search conducted before filing are also deductible as part of the costs of acquiring the mark.

Trademark Monitoring Services Subscription fees for watch services that monitor new filings for potential conflicts with your registered marks may be deducted as a cost of protecting the asset.

Income Tax vs Self-Employment Tax For income tax purposes, trademark costs are deducted as ordinary business expenses if you are a corporation or LLC. For sole proprietors, the costs are deductible against self-employment income.

Capitalization vs Current Expense For new trademark filings, costs may need to be capitalized rather than immediately expensed if the trademark has not yet been approved for registration and use.

Proper documentation of all trademark-related fees and evidence of the business purposes for incurring the costs is important to support the tax deductions if audited. Consulting a tax professional is advisable to ensure compliance.

Capitalization of Trademark Costs

Relevant sections of Internal Revenue Code

Here are some relevant references from the Internal Revenue Code and IRS guidance to support the tax deductibility of trademark fees and costs:

Internal Revenue Code Section 162 - Trade or Business Expenses This section allows a deduction for "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business."

IRS Publication 535 - Business Expenses (Page 8) "You can deduct the costs of obtaining and protecting trademarks..." It specifically lists trademark fees, legal expenses for getting trademarks, and renewing trademarks as deductible.

Treasury Regulation 1.263(a)-4(b)(1)(vii) Requires capitalization of amounts paid to obtain rights from a governmental agency, including payments to obtain trademark protection. But IRS Information Letter 2003-0293 clarifies that maintenance fees for existing trademarks are currently deductible.

Treasury Regulation 1.167(a)-3 Provides guidance on when capitalized trademark costs can be amortized/depreciated as the trademark is used in the business.

IRS Revenue Ruling 2000-4 States that advertising expenditures paid to obtain public recognition of a trademark may be currently deductible as ordinary advertising costs.

IRS Publication 334 - Guide to Federal Tax for Small Business (Page 11)
Confirms that fees paid to trademark property are deductible as operating expenses.

The key requirement is that the trademark relates to an active trade or business and the costs are ordinary and necessary for that business. Proper documentation is needed to claim the deductions.

Check with your accountant for the specifics, and don't forget to keep your receipts!