We all agree that filing a patent application is an expensive process. However, patent application costs are usually tax deductible, but the question is: are annuity fees relating to maintaining a patent tax deductible? 

Patents can be capitalized when the underlying technology is being used to generate income and over the long term. The expenses incurred in applying for or acquiring a patent should generally be capital in nature. Annuity fees, which are patent renewal fees are usually fees paid to maintain a patent and are generally expensed not capitalized due to the materiality (annuity fees are usually small in nature and recurring every year or 5 years). This is not the rule however, there are some companies who have multiple patents being used and commercialized and capitalize their annuities as these annuities are more material. Whether or not you can capitalize the annuity is dependent on: 

1. How material the annuity fees are

2. Internal company procedures and capitalization limits

3. Utilization of the patent application and technology to generate income