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How do I deduct is chatgpt subscription tax deductible business expense on my taxes?

TL;DR

A ChatGPT subscription can be a deductible business expense if it is used primarily for business purposes, such as research, content creation, or customer interaction. Personal use of the subscription would not be deductible.

Detailed Answer

The cost of a ChatGPT subscription is deductible as a business expense if it is both ordinary and necessary for your trade or business. For example, a freelance writer using ChatGPT to generate content ideas or a consultant using it to draft client reports can deduct the subscription cost. However, if the subscription is used for personal purposes, such as casual conversation or personal learning, that portion of the expense is not deductible. If the subscription is used for both personal and business purposes, you must allocate the cost between the two and only deduct the business portion. This is similar to the rules for other mixed-use expenses, like a cell phone or internet service.

Where to Put It on the Tax Form

Schedule C, Line 27a for 'Other Expenses'.

Real World Example

A freelance graphic designer subscribes to ChatGPT for $20 per month to assist with generating creative ideas and drafting client proposals. Over the year, they spend $240 on the subscription. Since 80% of the use is for business, they can deduct $192 (80% of $240) on their Schedule C.

Calculation Required

A calculation is required for this deduction.

To calculate the deductible portion, determine the percentage of business use. Multiply the total cost of the subscription by this percentage. For example, if the subscription costs $240 annually and is used 80% for business, the deductible amount is $240 x 0.80 = $192.

Audit Risk & Documentation Tips

Audit risk is moderate, especially if the subscription is used for both personal and business purposes. Keep detailed records of how the subscription is used, including logs or notes on business-related activities. Save receipts and any correspondence or contracts that demonstrate the business necessity of the subscription.

IRS Reference

IRS Publication 535, Business Expenses; IRC §162.

Relevant Industries

FreelancersConsultantsContent CreatorsWriters

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Disclaimer: This is for informational purposes only and should not be construed as tax or legal advice. Always consult your tax advisor.

Page created on July 25, 2025

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