The write-off Congress killed and two states kept: Can I deduct my accountant and lawyer fees?

For eight years, the answer has been no.

The management fee on your brokerage account: no. Your accountant's bill: no. The lawyer you paid to answer a tax question: no. The work expenses you covered yourself and nobody paid back: no.

All of it used to sit in one place on Schedule A, a category called miscellaneous itemized deductions. The 2017 tax law suspended the whole thing. Not repealed, suspended, with an expiry date written into the statute: the end of 2025.

So for eight years the honest answer was "not right now, but it comes back in 2026." Accountants put it in their year-end letters. This was supposed to be the year.

In July of 2025, Congress made the suspension permanent.

That's the federal story, and it's finished. Here's the part almost nobody noticed: two states never went along with it.

Why didn't New York and California go along?

Because neither one ever repealed its own version.

A state income tax is its own body of law. It borrows from the federal code where it wants to and ignores it where it doesn't, and when Congress suspended this category, neither state followed. The lines are still sitting there.

There's a second surprise sitting next to that. Both states let you itemize on the state return even when you took the standard deduction federally. Since 2017 the federal standard deduction has been big enough that itemizing stopped being worth anyone's weekend, so people stopped keeping receipts. The state return kept asking anyway.

If you have money with an advisor, your largest item on that list is one you have never thought of as a receipt: the management fee. It's debited quarterly, it never arrives as a bill, and it shows up once a year on a statement nobody opens. Most people reading this could find four figures of deduction in a document they already have.

Founders are the exception. Their list looks nothing like that.

What does $17,400 of fees actually buy?

Let's look at Sohan, who runs an edtech startup out of a Flatiron sublet, to see how little of this survives.

He's 28. The Series A closed in March. He pays himself $135,000, less than two of his five engineers, and rents a one-bedroom in Crown Heights.

He's not a wealthy man. He's still spent $17,400 on professional fees this year:

• $11,000 to a tax attorney, because he spent four months in Miami with his partner and New York asked him to prove he still lived here
• $3,500 reviewing his QSBS position and his old 83(b), after Series A diligence raised questions
• $2,900 to a CPA, for a personal return with his company's K-1 on it

His federal return deducts none of it.

New York will take some. Working out how much takes three subtractions, and the money he spent proving he still lives in New York turns out to be deductible only on a New York return.

Which part of a legal bill counts?

Not all of it, and this is where founders lose the whole thing.

One bill from one firm can cover three kinds of work, and the tax code treats all three differently.

Tax advice counts. Sohan's was day counts, domicile, whether four months in Florida changed where he lived. Advice about the determination of a tax. That's the deduction.

Corporate work doesn't. The Series A documents, the board consents, the stock plan amendment. That's the company's expense, billed to the company, and it never touches his 1040.

Selling something is its own category. Those fees come off the sale proceeds and reduce the gain rather than getting deducted, which is usually the better outcome anyway.

Same firm, same month, three answers. Get the invoice split that way before you pay it, because nobody can reconstruct it in April.

How much of it actually survives?

About a quarter of it. It gets cut three times on the way down.

The first cut punishes income. Only the part of the category above 2% of your AGI is deductible, which puts Sohan's floor at $2,700. Earn more and the floor rises with you, so the same invoice in front of a partner at his own law firm would almost entirely disappear. It also means a single item rarely clears on its own: his CPA bill never would have.

The middle cut is New York's. Once your income passes $100,000 the state quietly takes back a slice of your itemized deductions, climbing to a full quarter at $150,000 — $2,572 of Sohan's, since he's only partway up that staircase. It's the same one that drives the state's tax benefit recapture, measured on the same income.

The last cut is the one that decides it. New York hands a single filer $8,000 of deduction before they prove anything at all, so receipts only start counting once they're taller than that.

Which is the honest answer for most founders. If you rent and you don't give much, you can't get there. No mortgage interest, no property tax, and New York makes you back state income taxes out of the total. You end up staring at $8,000 of free deduction with no way over it.

Sohan only clears it because New York asked him an expensive question.

So what's it worth?

$4,128 of deduction, at New York's rate stacked with the city's, comes to about $425.

Four hundred and twenty-five dollars, on $17,400 of fees, for a man who had to be asked to prove where he lived to qualify. That's not a headline. It's also money he'd otherwise hand over for no reason, on a form he's already filing.

Why is the same bill worth double in San Francisco?

Move him to the Mission, change nothing else, and it inverts.

California starts in the same place, with the same 2% floor taking the same bite. From there it does two things differently and both go his way. It doesn't trim his deductions at all, because its own phase-out starts far above what he earns. And it hands out a much smaller standard deduction than New York does, so far more of what he paid clears the bar instead of being free anyway.

New York is the state with the famous cliffs in it. For a founder at this income it's also the stingier of the two about the thing he actually paid for.

What's your next move?

Add up the category before you go hunting for receipts. Four items, one number, measured against 2% of your federal AGI and then against your state's standard deduction. For most people who rent, it doesn't clear, and ten minutes of arithmetic saves you a weekend of invoices.

Split the legal bill at the source. The only people who can tell you which part of it was tax advice are the people who sent it, and they'll tell you in October. They won't in April.

The useful thing here isn't the four hundred and twenty-five dollars. It's that your state return is a different document than your federal one, running rules Congress repealed years ago, and nobody is going to tell you which ones. For eight years the answer was no so reliably that people stopped asking the question. It's still no in Washington, permanently now.

It's still a line with a number on it in Albany and in Sacramento. Someone has to put it there.

Quick refresher

• Miscellaneous itemized deductions. The old Schedule A category for the costs of earning and managing money: investment fees, tax advice, tax prep, unreimbursed work expenses. Suspended federally in 2017, made permanent in 2025, still alive in both states.
• The 2% floor. Only the part of the category above 2% of your federal AGI counts, on either state's return.
• New York's trim. A slice of your itemized deductions the state takes back, phasing in from $100,000 of New York income to a full quarter at $150,000.
• The standard deduction gate. $8,000 in New York for a single filer, about $5,800 in California. Your receipts have to beat it before any of this is worth a cent.