Are Notary Fees Taxable? Income, Sales Tax & Deductions

Notary fees represent payments for official acts performed by a notary public, such as witnessing signatures or certifying copies of documents. These fees are a common part of various legal and financial transactions, raising questions about their tax implications for both the notary and the payer. Understanding how these fees are treated under federal and state tax laws is important for compliance. This article clarifies how notary fees are classified as income, their susceptibility to sales tax, and when they may be deductible.

Notary Fees as Taxable Income

Notary publics who receive fees for their services generally consider these amounts as taxable income for federal income tax purposes. This applies whether the notary performs services frequently as a business or occasionally as a side activity. The Internal Revenue Service (IRS) requires that all income be reported unless specifically excluded by law.

For notaries operating as sole proprietors, these fees are typically reported on Schedule C (Profit or Loss from Business) of Form 1040. This schedule allows for reporting gross income and deducting ordinary and necessary business expenses incurred in earning that income. The net profit calculated on Schedule C is then transferred to Form 1040 and is subject to income tax.

Notaries operating independently are also subject to self-employment tax. This tax covers Social Security and Medicare taxes, which are generally 15.3% on net earnings from self-employment up to an annual earnings limit for Social Security, and 2.9% for Medicare on all net earnings. Notaries must pay both the employer and employee portions of these taxes, which fund future Social Security and Medicare benefits. State income tax regulations often align with federal guidelines regarding the taxability of professional service income.

Sales Tax Considerations for Notary Services

The application of sales tax to notary services is primarily determined by the specific laws of each state. Most states generally do not impose sales tax on services, including those provided by a notary public. Sales tax typically applies to the sale of tangible personal property, though some states have expanded their tax base to include specific types of services.

Some states may tax certain professional services, but notary services are typically categorized as professional or legal services, which are often exempt from sales tax. However, a few states might have specific provisions that subject notary services to sales tax, particularly if they are bundled with other taxable goods or services.

Notaries should consult their respective state’s Department of Revenue or taxation website for the most accurate and current information regarding sales tax obligations. These government resources provide detailed guidance on which services are taxable and any specific exemptions that may apply. Understanding these state-specific rules helps ensure compliance with local tax requirements.

Deducting Notary Fees

Individuals and businesses paying notary fees may be able to deduct these expenses under certain circumstances. For businesses, notary fees are generally deductible as ordinary and necessary business expenses if they are incurred in the course of conducting business operations. This includes fees paid for notarizing business contracts, corporate filings, loan documents, or other legal instruments essential to the business. These deductions reduce the business’s taxable income, thereby lowering its overall tax liability.

For individuals, the deductibility of notary fees is more restricted. Fees paid for personal documents, such as those related to a home purchase or a personal will, are typically not deductible. However, if notary fees are part of larger legal expenses related to the collection of taxable income, the determination of tax liability, or certain investment expenses, they might be considered deductible.

Under the Tax Cuts and Jobs Act (TCJA) of 2017, many miscellaneous itemized deductions, which previously included certain unreimbursed employee expenses and investment expenses, were suspended for tax years 2018 through 2025. This suspension significantly limits the ability of individual taxpayers to deduct notary fees. Taxpayers should review current IRS guidance or consult a tax professional to understand the specific rules applicable to their situation.