Are Tax Attorney Fees Deductible?

Many people seek the help of a tax attorney each year, but they aren’t always aware that there are limits to what legal fees are deductible. In most cases, personal legal fees for tax matters are not deductible. There are some business-related attorney fees that can become deductible expenses if certain conditions are met.

In most cases, personal legal fees for tax matters are not deductible.

In most cases, Personal legal fees for tax matters may not be deductible. The IRS does not allow you to deduct legal fees in most cases or as part of a divorce settlement. If you’re self-employed and have an attorney review your tax return, that expense is also not deductible because it’s considered a personal expense.

We did have a case where a man had to pay his wife’s legal fees as part of the alimony deduction back when alimony was deductible, and we got him that deduction. But, this is not the norm.

If you’re unsure about how much of your legal bill would qualify under this exception or how best to claim it on Form 1040 Schedule A Itemized Deductions line 24a(1).

What types of legal services are deductible?

One of the most common types of legal fees that can be deducted is employment discrimination cases. If you’re suing your former employer for discrimination, your attorney’s fees are deductible.

In addition to employment discrimination cases, there are other types of lawsuits that allow you to deduct your attorney’s fees and costs associated with filing papers and paying court costs. These include:

Certain property claims against government agencies or officials;
Whistleblowers claim if the IRS awards money back to whistleblowers who expose fraud against Uncle Sam; and
Cases involving Social Security benefits where someone has been wrongfully denied their benefits by the government agency responsible for handling such matters (Social Security Administration).

Business-related attorney fees may become a deductible expense

Attorney fees related to a business are sometimes deductible. This includes general business matters such as collections, rental property issues, and legal fees associated with an audit or if the business is being sued.

Attorney fees for property acquisition are also deductible as long as they can be attributed directly or indirectly to the production of income. In order to qualify for this deduction, you must itemize your deductions on Schedule A (Form 1040).

You should ask your tax attorney first

Before you claim the fees of a tax attorney as a deduction, you should ask your tax attorney first.

If your attorney is unable to provide any guidance on whether or not your fees are deductible, then it may be best to consult with someone else who specializes in this field such as an accountant or CPA instead.