Quick Answer
Background checks required for work are deductible for self-employed individuals and business owners, but not for W-2 employees (since 2018). Self-employed professionals can deduct 100% of these costs, typically saving 30-40% in taxes. The average background check costs $50-150.
Best Answer
Diana Flores, EA
Freelancers and independent contractors who need background checks for client work
Yes, self-employed individuals can deduct required background check costs
If you're self-employed and need a background check to work with clients or obtain contracts, these costs are fully deductible as ordinary and necessary business expenses. The IRS allows deductions for expenses that are both ordinary (common in your business) and necessary (helpful for your business).
Common scenarios where background checks are deductible
Example: IT consultant background check deduction
Mike is a freelance cybersecurity consultant who needs various background checks for different clients:
Total annual background check costs: $270
As a self-employed individual in the 24% tax bracket, Mike also pays 15.3% self-employment tax. His effective rate on deductions is 39.3%.
Tax savings: $270 × 39.3% = $106
This means Mike's actual out-of-pocket cost is only $164 after tax savings.
Types of background-related costs you can deduct
Key requirements for deductibility
How to report and document these deductions
Report background check costs on Schedule C, Line 27a (Other expenses). Use a description like "Background checks and security screening."
Documentation to keep:
What you should do
Track all background check expenses throughout the year, including travel costs to fingerprinting locations and parking fees. Many self-employed professionals overlook these smaller expenses that can add up to significant tax savings.
[Scan your tax return to see if you missed deducting background check costs from previous years →]
Key takeaway: Self-employed professionals can deduct 100% of work-required background check costs, typically saving $30-60 per $100 spent. Even small screening fees of $25-50 add up to meaningful tax savings over time.
*Sources: [IRS Publication 535](https://www.irs.gov/pub/irs-pdf/p535.pdf) - Business Expenses, [IRS Schedule C Instructions](https://www.irs.gov/pub/irs-pdf/i1040sc.pdf)*
Key Takeaway: Self-employed professionals can deduct 100% of work-required background checks, saving 30-40% in taxes on these often-overlooked business expenses.
Background check cost deductibility by employment type and common fees
| Employment Type | Deductible? | Average Cost | Potential Tax Savings |
|---|---|---|---|
| Self-employed/1099 | Yes - 100% | $50-200/year | $15-80/year |
| W-2 Employee | No (2018-2025) | $25-150/check | $0 |
| Business Owner | Yes - employee costs | $25-75/employee | 21-37% of cost |
| Mixed W-2 + 1099 | 1099 portion only | $50-150/year | $15-60/year |
More Perspectives
Diana Flores, EA
Employees who pay for background checks required by their employer
W-2 employees cannot currently deduct background check costs
Unfortunately, if you're a W-2 employee, you cannot deduct background check costs on your federal tax return, even if your employer requires them as a condition of employment. This changed with the Tax Cuts and Jobs Act of 2017.
Timeline of the deduction:
What W-2 employees should do instead
Ask your employer to reimburse: Many employers will cover background check costs if you ask. Frame it as a business expense they can deduct.
Check state tax laws: Some states still allow these deductions on state returns, even if the federal government doesn't.
Keep records: Save all documentation in case the federal deduction returns or for potential state benefits.
Consider HSA funds: If the background check is health-related (like for healthcare workers), it might qualify as a medical expense payable from an HSA.
Example of lost deduction value
Jessica is a nurse who pays $125 annually for required background checks and drug testing. Before 2018, she could potentially deduct this amount. At a 22% tax bracket, she would have saved about $28 per year (after the 2% AGI threshold). Over the 8-year suspension period (2018-2025), she's missing out on roughly $220 in tax savings.
Key takeaway: W-2 employees lost a valuable deduction in 2018 but should keep records and request employer reimbursement where possible.
Key Takeaway: W-2 employees cannot deduct background check costs since 2018, but should keep records and request employer reimbursement to minimize out-of-pocket costs.
Diana Flores, EA
Recent graduates and career changers who need multiple background checks
Background check costs can add up quickly for job seekers
Young adults often face multiple background check requirements when starting their careers or changing industries. While W-2 employees can't deduct these costs, understanding when they might become deductible helps with career planning.
Common background check scenarios for young adults
When these costs might become deductible
If you switch to freelance work: Background checks for independent contractor positions are fully deductible.
If you start a side business: Self-employment income makes related screening costs deductible.
If you become a business owner: Employee screening costs are business deductions.
Smart strategies for young professionals
Budget for screening costs: Factor $100-300 annually for background checks in career-heavy fields.
Ask about employer coverage: Many companies will reimburse background check costs if requested.
Choose comprehensive screening: Some background check companies offer multi-state or multi-year reports that provide better value.
Keep detailed records: Even if not currently deductible, good record-keeping helps if your employment status changes.
Planning for potential freelance income
Many young professionals supplement W-2 income with freelance work. If you earn any 1099 income, background checks related to that work become deductible on Schedule C.
Example: Sarah works full-time as a marketing coordinator but also freelances as a social media consultant. Her freelance clients require background checks costing $85 annually. She can deduct this full amount against her freelance income, saving about $25-35 in taxes.
Key takeaway: Young adults should budget for background check costs and keep detailed records, as these expenses become valuable deductions if employment status changes to self-employed.
Key Takeaway: Young professionals should track background check costs and consider how career moves toward self-employment could make these expenses tax-deductible in the future.
Sources
- IRS Publication 535 — Business Expenses - defines ordinary and necessary business expenses including screening costs
- IRS Publication 463 — Travel, Gift, and Car Expenses - covers job-related expenses for self-employed individuals
Related Questions
Reviewed by Diana Flores, EA on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.