What expense category is Trademark Registration and Renewal Fees?

A trademark is one of a company's most valuable assets—it's the brand name, logo, and slogan that distinguishes it in the marketplace. The costs to register and maintain a trademark with the U.S. Patent and Trademark Office are a necessary investment to protect this intellectual property.

However, for tax purposes, these costs are not a simple, currently deductible business expense. The IRS considers a trademark a long-term asset, and the costs associated with acquiring it must be capitalized and recovered over time. This guide explains how to categorize trademark-related fees correctly in accordance with IRS rules, ensuring your business remains compliant.

Trademark Registration and Renewal Fees Category

The costs you incur to acquire a trademark are capital expenditures. They cannot be deducted in the year they are paid.

IRS Publication 535 explicitly classifies a trademark or trade name as a Section 197 Intangible. This means the costs to acquire the trademark must be capitalized and then amortized (deducted in equal amounts) over a 15-year period.

Important Considerations When Classifying Trademark Costs

The tax treatment for trademark costs is specific, and it is crucial to distinguish between different types of fees.

Acquisition Costs vs. Renewal Fees

• Acquisition Costs (Capitalize): The initial costs to acquire the trademark must be capitalized. This includes government filing fees and legal expenses associated with the application process.
• Contingent Payments/Renewal Fees (Potentially Deductible): Publication 535 notes an exception for certain contingent payments and renewal fees. While not explicitly defining renewal fees in this manner, if a recurring fee is based on productivity or usage, it can be deducted currently. 

Standard government renewal fees, paid periodically to maintain the trademark's active status, are generally treated as a currently deductible business expense.

Amortization of Acquisition Costs

The initial costs of acquiring a trademark must be amortized relatively (in equal amounts) over 180 months (15 years), beginning with the month the trademark is acquired or the month your business begins, whichever is later. This 15-year amortization is mandatory for all Section 197 Intangibles.

Created vs. Purchased Trademarks

The amortization rule applies whether you are registering a trademark you created for your business or purchasing an existing trademark from another party. The total cost to acquire the asset must be capitalized.

Tax Implications and Recordkeeping

The reporting for trademark costs depends on whether it is an initial capitalized cost or a recurring renewal fee.

How to Report the Costs

• Amortization Deduction: The annual amortization deduction for the initial trademark registration cost is calculated and reported on Form 4562, Part VI, Amortization. The total from this form is then carried to your main business tax return (e.g., Schedule C, Line 13).
• Renewal Fees: Deductible renewal fees are reported on Schedule C (Form 1040), Part V, Other Expenses, with a description such as "Trademark Renewal Fees."

What Records to Keep

You must maintain meticulous records to substantiate all costs related to trademarks. This includes:

• Invoices from your trademark attorney.
• Receipts for all filing and maintenance fees paid to the U.S. Patent and Trademark Office.
• Proof of payment for all related services.
• The official trademark registration and renewal certificates.

How Fyle Can Automate Tracking for Trademark Fees

Fyle helps you capture and organize all the legal and administrative costs associated with your trademarks, ensuring they are properly categorized for tax compliance.

• Centralize Legal Invoices: Have your trademark attorney email invoices directly to Fyle for automatic and accurate data capture.
• Track by Asset: Code all costs related to a specific trademark to a project to easily aggregate the total basis for capitalization.
• Create a Clear Audit Trail: Attach the official registration certificate and all related legal documents to the expense records in Fyle.
• Automate Your Accounting: Sync capitalized trademark costs to the correct intangible asset account in QuickBooks, Xero, NetSuite, or Sage Intacct.