Buying a Client List? Why the IRS Makes You Write It Off Over 15 Years

Published: August 27, 2026 · Reading time: 10 min

TL;DR: Pay another freelancer for their client relationships — a "book of business," a customer list, even without buying any equipment or taking over a lease — and IRC §197 classifies that purchase as an amortizable intangible, forcing you to write it off ratably over 15 years (180 months), starting with the month you acquired it. There is no election out, no shortcut for your own honest estimate of how long you'll actually keep those clients, and no de minimis safe harbor for intangibles at any dollar amount — the tangible-property safe harbor in Reg. §1.263(a)-1(f) doesn't reach this purchase at all. The deduction is computed on Form 4562 Part VI and lands on Schedule C Line 27b, not Line 13 and not Line 27a.

A departing hairstylist offers to sell you her client list. A retiring bookkeeper wants to hand off her book of business to someone she trusts. A photographer closing up shop will part with a folder of past clients for a few hundred dollars. These deals happen constantly among freelancers, and the tax treatment on the buying side is almost never what people expect.

What You Actually Bought: An Intangible, Not an Expense

The instinct is to treat this like any other business cost — categorize it as "advertising" or "professional services" and deduct it in the year you paid it. That instinct is wrong, and the reason is worth understanding before you file anything.

A client list is property — specifically, a customer-based intangible under IRC §197(d)(1)(C)(iv), defined further in 26 CFR §1.197-2(b)(6) as "any composition of market, market share, or other value resulting from the future provision of goods or services pursuant to contractual or other relationships in the ordinary course of business with customers." You didn't pay for a service performed for you — you paid to acquire an asset: the expectation of future business from a known set of people.

Once something is property rather than an expense, the code's default is to spread its cost over the years it's expected to produce income, rather than deducting it all at once. For most business intangibles acquired after August 10, 1993, Congress picked one number for that spreading period, and it doesn't bend to the facts of your deal.

The 15-Year Rule, From the Statute Itself

IRC §197(a) states it plainly: a taxpayer is entitled to an amortization deduction "by amortizing the adjusted basis... ratably over the 15-year period beginning with the month in which such intangible was acquired."

Three things in that sentence matter more than they look:

1. Ratably — straight-line, the same dollar amount every month. No front-loading, no back-loading.
2. 15 years, full stop — not "up to 15 years," not "unless you can show a shorter useful life." There is no election and no exception based on your own facts.
3. Beginning with the month of acquisition — the clock starts on the actual calendar month you bought the list, using a full-month convention, not the half-year averaging convention used for depreciating physical property like a laptop or a vehicle.

Before Section 197 existed (pre-1993), taxpayers and the IRS fought constantly over how long an intangible like a client list would "really" last — three years, seven years, indefinitely — with results that varied by industry, by taxpayer, and by how good the argument was. Congress ended that fight by imposing one flat, mandatory number in exchange for certainty. You don't get to reopen that argument just because you're confident your particular clients will churn faster.

"But I Didn't Buy a Whole Business" — Why That Doesn't Matter Here

This is the trap that catches freelancers who've heard something about intangible amortization rules. The instinct is: "the 15-year rule is for buying a whole business — I just bought a list, nothing else changed hands." Reading the statute's actual structure shows why that instinct is wrong for this specific asset.

IRC §197(c)(1) defines what makes an intangible "amortizable" at all. It has two requirements:

(A) acquired by the taxpayer after August 10, 1993, and (B) held in connection with the conduct of a trade or business...

Notice what's not there: nothing in (c)(1) requires that the intangible be acquired as part of buying an entire trade or business. It only requires that you use it in an existing trade or business — which is trivially true for any working freelancer who buys a client list to grow their own practice.

The "acquired as part of buying a whole business" condition does exist elsewhere in the statute — it's just narrower than most people assume:

A standalone client-list purchase — no equipment, no lease, no employees, nothing else in the deal — checks every box in (c)(1) on its own. It doesn't need to be part of a larger acquisition to trigger the full 15-year regime.

What the De Minimis Safe Harbor Can't Do for You

If you've read about the de minimis safe harbor for expensing small purchases outright (see The De Minimis Safe Harbor Election), you might assume a $600 or $900 client-list purchase falls under it. It doesn't, and the regulation says so directly.

26 CFR §1.263(a)-1(f)(1) scopes the election, by its own terms, to amounts paid "for the acquisition or production of a unit of tangible property." An intangible simply isn't the kind of property this safe harbor was written to cover — acquiring or creating an intangible is governed instead by a completely separate regulation, §1.263(a)-4 ("Amounts paid to acquire or create intangibles"), which contains no comparable small-dollar shortcut for a purchased customer list. There is no dollar amount at which a client-list purchase can simply be written off in year one. A $600 list and a $90,000 list get the identical treatment — just $3.33/month and $500/month, respectively, over the same mandatory 180 months.

Worked Example: A $9,000 Client List, Two Amortization Schedules

Maya, a freelance hairstylist, pays a departing colleague $9,000 for a list of 40 regular clients — their contact information and service history. No chairs, no product inventory, no lease assignment; just the list. The deal closes in March 2026.

Monthly amortization: $9,000 ÷ 180 months = $50.00/month, starting March 2026.

The deduction completes in February 2041 — nearly 15 full years after the purchase, exactly as the statute requires, regardless of how much longer (or shorter) Maya actually keeps those 40 clients as customers.

Contrast — a trivially small purchase: Jordan, a freelance photographer, pays a friend closing their studio $600 for a short list of 15 past clients, deal closing in June 2026. Same rule, same 180-month term: $600 ÷ 180 = $3.33/month. There is no dollar threshold below which this collapses into an ordinary expense — the mechanics are identical to Maya's, just scaled down.

Getting It on the Right Form, and the Right Line

Amortization of a purchased intangible is computed in Form 4562, Part VI. This is a genuinely separate computation from Parts I–III of that same form, which cover depreciation and Section 179 for physical property (see Form 4562: Depreciation and Amortization for how the whole form fits together). Part VI's total does not feed into the summary line that flows to Schedule C Line 13 — a natural place to look, since that's "where write-offs for capitalized property go" for everything else on the form.

Instead, the Part VI amortization amount is reported as an itemized entry in Schedule C Part V, "Other Expenses." Part V's own Line 48 instruction, on the current (2025) revision of Schedule C, reads verbatim: "48 Total other expenses. Enter here and on line 27b." Schedule C recently split what used to be a single Line 27 into 27a — now reserved for the Form 7205 energy-efficient-commercial-buildings deduction — and 27b for everything formerly reported there. (If you're cross-referencing Schedule C Part V: Other Expenses, note that the routing described there predates this split.)

The One Real Exception: Buying From a Related Party

IRC §197(f)(9) — the "anti-churning" rule — denies amortization if the intangible, or the customer relationships behind it, was already held or used on or after July 25, 1991 by you or a "related person" (family members, business partners, and commonly-controlled entities, defined by cross-reference to §267(b) and §707(b)(1)), and the sale is really just shuffling the same asset between related parties to generate a fresh, amortizable basis that wasn't there before.

For an arm's-length purchase between two unrelated freelancers — which describes nearly every version of this transaction in 2026 — this rule simply doesn't come up. It matters only if you're buying a list from a parent, sibling, business partner, or an entity you or they control, and that person's relationship with those specific clients goes back before mid-1991.

Quick Reference

Frequently Asked Questions

I bought a small client list from another freelancer for $600. Can I just expense it as a business cost?

No. The de minimis safe harbor that lets you expense small purchases outright is scoped to tangible property only — Treas. Reg. §1.263(a)-1(f)(1) applies to acquiring or producing "a unit of tangible property." An intangible asset simply falls outside what that safe harbor covers by its own terms; acquiring or creating an intangible is governed by a separate regulation, Reg. §1.263(a)-4, which has no comparable small-dollar shortcut. A client list is an intangible asset (specifically a customer-based intangible under IRC §197(d)(1)(C)(iv)), so there is no dollar threshold at which it can simply be expensed. Even a $600 purchase gets the full mandatory 15-year amortization under §197(a) — the same treatment as a $90,000 purchase, just spread thinner.

Does the 15-year amortization rule only apply if I bought an entire business, not just a client list?

No — that's a common but incorrect assumption, and it doesn't hold up against the statute's actual text. IRC §197(c)(1) defines an "amortizable section 197 intangible" as one acquired after August 10, 1993 and "held in connection with the conduct of a trade or business" — it only requires that you use the intangible in an existing business, not that you acquired it as part of buying a whole business. The "acquired as part of buying a trade or business" gate does appear elsewhere in the statute, but only for two specific things: self-created intangibles under §197(c)(2), and a covenant not to compete under §197(d)(1)(E). A purchased customer list falls under §197(d)(1)(C)(iv) instead, which carries no such gate. A bare list purchase — no equipment, no lease, nothing else changing hands — still gets the full 15-year regime.

Can I amortize a purchased client list over the 3–5 years I actually expect to keep those clients, instead of 15 years?

No. IRC §197(a) is explicit: the deduction is computed "by amortizing the adjusted basis... ratably over the 15-year period beginning with the month in which such intangible was acquired." There is no election to use your own estimate of useful life, and no shortcut for a freelancer who realistically expects client turnover well inside 15 years. Ending decades of litigation over exactly this kind of useful-life dispute was the entire point of enacting Section 197 in 1993 — Congress traded taxpayers a predictable, guaranteed deduction for giving up any argument that their intangible's real economic life is shorter.

Where does client-list amortization go on my Schedule C — is it the same line as depreciation?

No, and this is a frequent point of confusion. Schedule C Line 13 (Depreciation and Section 179) explicitly excludes anything not computed in Form 4562 Parts I–III — those cover physical property. Amortization of an intangible like a purchased client list is a separate computation, made in Form 4562 Part VI, and it does not flow into the same Part IV summary that feeds Line 13. Instead, it's reported as an itemized expense in Schedule C Part V ("Other Expenses"), whose total on Line 48 flows to Line 27b on the current (2025) revision of Schedule C. (Two other posts in this series still describe that total as flowing to Line 27a — that was correct on an older form revision, but the current Schedule C moved Other Expenses to 27b and gave 27a to the new Form 7205 energy-efficient-commercial-buildings deduction instead.)

What happens if I buy a client list from a family member or a former business partner?

Watch for the anti-churning rule. IRC §197(f)(9) denies amortization entirely if the intangible (or the underlying customer relationships) was held or used at any time on or after July 25, 1991 by you or a "related person" — defined by cross-reference to §267(b)/§707(b)(1), plus common 20%-ownership relationships — and the transaction is essentially just moving the same asset between related parties to manufacture a fresh, amortizable basis. For an arm's-length purchase between two unrelated freelancers, this almost never applies. It becomes a real risk only when the seller is a close family member, a business partner, or a commonly-controlled entity whose relationship with those specific clients predates July 1991 — vanishingly rare in a 2026 transaction, but worth ruling out before you assume the deduction is automatic.

Authoritative References

• 26 U.S.C. §197 — Amortization of goodwill and certain other intangibles
• 26 CFR §1.197-2 — Amortization of goodwill and certain other intangibles
• 26 CFR §1.263(a)-1 — Capital expenditures; in general
• IRS — Instructions for Form 4562
• IRS — Instructions for Schedule C (Form 1040)

Related reading: Form 4562: Depreciation and Amortization · Selling Your Freelance Business: Asset Allocation and Form 8594 · Schedule C Part V: Other Expenses · The De Minimis Safe Harbor Election

The Records That Make a 15-Year Deduction Defensible

A deduction you're still claiming in year 12 is only as good as the paperwork that proves what you paid and when. CentSense keeps the purchase invoice, the closing date, and every year's amortization entry tied to the same digital record, so a client-list purchase you made this year is still fully documented if the IRS asks about it in 2039. Free tier includes 10 AI scans per month; Solo is $5/month for unlimited scanning and mileage logging.

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This guide is general education for U.S. freelancers and Schedule C filers covering the 2026 tax year. It is not personalized tax advice. Whether a specific purchase qualifies as a Section 197 intangible, and how it should be allocated against other assets in a larger deal, are fact-specific questions. Consult a CPA or EA before finalizing a purchase agreement for a client list or book of business.