Can You Deduct Lawyer Fees on Your Taxes?

By: Thomas T. Woods

There are over a million licensed active lawyers working in the United States, according to a report by the American Bar Association. With that many lawyers working, it makes sense that there are even more active cases each year.

So, are lawyer fees tax deductible? You probably have this question if you are one of the millions of Americans that used a lawyer this year. Read on to explore what instances the fees are tax-deductible and which instances they are not.

Lawyer Fees That Are Deductible

Deducting lawyer fees on taxes generally comes down to the type of legal fees you have. If you have legal fees related to your business, including any rental properties you might own, these could be deductible.

For example, if you had a legal case due to needing to evict a renter from your property, the lawyer fees would be tax-deductible. This is true even if you didn’t win the legal case.

Other instances that would be tax-deductible include resolving tax issues relating to your business, fees that deal with the expenses of operating your business, fees associated with farm income, fees related to whistleblower claims, and fees related to unlawful discrimination claims related to your business.

One instance that is also tax-deductible that does not involve your business is the federal adoption tax credit. If you used a lawyer while adopting a child, and you qualify for this particular tax credit, your fees could be tax-deductible.

Lawyer Fees That Are Not Deductible

There are many other instances when these fees are not tax-deductible. This includes fees that relate to nonbusiness tax issues. This also consists of any personal legal expenses, as child custody law fees are not tax-deductible.

Other aspects included are fees dealing with real estate, personal injury, estate planning, divorce, title preparation, and civil or criminal charges.

This includes any fees that occur during an injury lawsuit or wrongful death case, which is something to consider. However, if you do win a settlement from a wrongful death case, those settlements tend to remain untaxable.

Another aspect that is not deductible is fees that arrive from any civil or criminal charges, even if it is due to being apart of a political campaign. While you cannot deduct lawyer fees on taxes for everything, consider that what you do deduct will need to be itemized.

Are Lawyer Fees Tax Deductible?

Are lawyer fees tax deductible? The answer is yes, and no. It comes down to your particular situation and what you are using your lawyer for. If it is business-related, it most likely is tax-deductible. Remember to keep that in mind when doing your taxes for your business to get the most deductions possible.

If you are using a lawyer for more personal reasons, your fees are probably not tax-deductible. However, it never hurts to double-check, such as for the adoption tax credit, to ensure you are getting everything you can. If you enjoyed this article and found it helpful, browse through more today to find extra lawyer-based advice!

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