Are attorney fees tax deductible?

 

You will often come across situations where you will have to seek the assistance of a lawyer. In fact, you will not be able to live your life without encountering the need to get the assistance of an attorney. For example, you will come across the need to contact an attorney when you become a victim of an auto accident, when you want to lease your house, or when you are about to get divorce. In all such instances, you will be concerned about the attorney fees. Along with that, you will also wonder are attorney fees tax deductible or not as well. Keep on reading this article and we will be sharing answers to all the questions that you have.

Are attorney fees tax deductible?

The general rule is that personal attorney fees are not tax deductible. This is applicable for all the investment related attorney fees that you will be spending out of your pocket as well. There are some exceptions in here. For example, there was something called miscellaneous itemized tax deduction. However, this was changed in the year 2018. Hence, you are no longer capable of getting a tax deductible on the attorney fees.

Here are some of the most common examples for the attorney fees that you will not be able to get a tax deduction.

-          The cost associated with filing a personal injury lawsuit and winning it.

-          Settling a will or estate tax planning

-          Assisting in the process of purchasing a home

-          Resolving title disputes or issues

-          Changes to your name

-          Obtaining child support or custody of a child

-          Criminal cases

-          Legal defense that would take place in the civil lawsuits

What are the personal attorney fees that you can deduct

There are situations where you will be able to proceed with deducting personal fees. Here are some of the examples for it.

-          Employment discrimination cases

During employment discrimination cases, you are provided the chance to receive a 100% tax deductible on the attorney fees. However, these would be applicable only if you are the victim in certain cases. The cases are related to job-related discrimination, which can take place based on disability, age, religion, sex, and race. You will be able to itemize the personal deductions and proceed with the claim. However, you will need to make sure that there is no possibility for you to deduct more than the gross income associated with the lawsuit. You will need to keep that limitation in your mind and proceed with the attorney fees deductibles.

-          Some of the property claims

There are certain property claims that you are fighting against the Federal government. You will be able to receive a tax deductible on attorney fees for those situations. For example, assume a situation where the federal government causes damages to your personal property by some means. Then you will be able to file a claim and fight against it. When you are trying to do this, you will be able to seek the assistance of a lawyer. The attorney fees will be tax deductible in such a situation. You will have the freedom to adjust that from your income as well.

-          Whistleblower cases

It is possible for you to get tax deductible on the attorney fees on whistleblower cases as well. In case if the IRS goes ahead and provides you with a whistleblower award, you will have to tell the IRS that someone is cheating on the taxes, while committing to many other legal violations. In case if the IRS goes ahead and collects money from those people, you will be able to receive a percentage of that in the form of an award. However, the attorney fees that you will have to bear in this case are tax deductible.

Tax deductibles related to businesses

You will not come across the need to seek the assistance of a lawyer for your personal matters. You will also come across the need to work along with a lawyer when you are working on numerous business matters as well. There are some of the business related attorney fees, which are eligible for tax deductions. Let’s take a quick look at them and figure out how you will be able to proceed with saving your money.

-          General business matters

In case if you are a business owner, you will come across the need to hire an attorney to work on the business matters. The cost associated with hiring an attorney can be tax deductible. That’s because you will be able to consider that in the form of an operating expense associated with the law.

For example, you will come across the need to get the assistance of a lawyer and collect money that one of the customers that owe you. In such a situation, you will be paying for the lawyer, but the attorney fees are fully tax deductible. Even if you are defending against an employment related lawsuit filed by one of your employees, you will be able to experience the tax deduction that you are eligible to receive.

-          Rental activities

In case if you are owning any rental property, it is possible for you to deduct all the attorney fees that will come across when you are working with the lawyers on tenant related matters. For example, when you are providing the rental property to new tenants, you will come across the need to seek the assistance of a lawyer. In such a situation, you will need to pay the lawyers with their fees. This fee would be tax deductible. Therefore, you will be able to go ahead with it without having to worry too much about anything.

-          Startup expenses

The business startup expense and attorney fees associated with them are tax deductible as well. it is a must for you to seek the assistance of a lawyer when you are starting a new business. That’s because you will have to deal with a large number of legal documents. For example, you will have to incorporate your newly established company. However, the tax deductible that is available on attorney fees is subjected to an upper limitation of $5,000. Anything that is above $5,0000 will be deducted during the first 60 months that you are operating your business.

Final words

Now you know when the attorney fees will become tax deductible. You will be able to keep these in mind when you are filing for taxes, so that you can save your money.