Taxpayer asks:
I have an online website sponsored through a company where I sell items and make a percentage off each sale. I am in the process of trying to get a trademark for the mark I use on the items that I sell. Unfortunately, there is someone else trying to get a similar trademark at the same time so my costs for getting the trademark (basically paying the attorney and the fees) are much more than I thought it would be. I have made over $600 from the site and my question is – are the costs for the trademark deductible? Do I need to form a small business in order to do this?
Taxgirl says:
Congrats on moving forward with your business! I know exactly what you’re talking about – I trademarked my mark, too.
You can absolutely deduct reasonable legal fees related to your business – and that includes your trademark. Even if you don’t eventually secure the trademark, the work may be deductible.
And no, you do not need to be incorporated in order to take the deduction.
You do need to be aware, however, that this is an area where the hobby/loss rules may apply. If you’re not sure whether you are operating as a business (even if you are not incorporated) or as a hobby, make sure you check out my prior post on hobby/loss rules.
For more information about other business related expenses which may be deductible, see this “ask the taxgirl” question with links to other resources!
Good luck!
(Note: Please read the comments below for additional important considerations!)
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
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