Posted by Elizabeth Retton

Unfortunately, the answer to this question is not a simple yes or no.  I would love to be able to say, “Yes!  Absolutely any time you have to pay an attorney some ridiculously astronomical sum, you can at least get the benefit of writing it off so that you aren’t taxed on that money!”  Wouldn’t that be nice?  But I’m sorry to say that, like most deductions, the rules are not cut and dry.  Whether or not you can claim some or all of your legal fees as a deductible in a given year depends entirely on the circumstances surrounding your legal expenditures.  So here’s the skinny on what you can use as a write off and what you can’t when it comes to legal fees.

For starters, personal legal fees are not deductible, not even if they concern your property or if you’re the one being sued.  Sorry about that.  Did half of the readers just log off?  If you thought you might be justified in writing off your legal expenses for a divorce, a custody battle, wrongful termination, injury due to faulty consumer goods, slipping on a wet floor, suing for defamation on Facebook, or anything else unrelated to business, you’re out of luck.  While you may be able to recoup your losses (including legal fees) through settlements or a win in court, you cannot write off any out-of-pocket attorney fees for any legal disputes that are purely personal in nature.

Now for the good part: the legal fees that can be written off.  Anything that is related to your business can be written off, and this applies to anyone who has a sole proprietorship, a partnership, an LLC, or some other form of incorporated business.  Further, any legal expenditure related to your business (either operations or investments) is considered fully deductible, which means you simply list the entire expense as a deduction.  Of course, the rules may differ slightly if you operate on a contract or freelance basis, in which case you may be limited to listing legal fees under miscellaneous itemized deductions and having to deal with certain restrictions.  You’ll certainly want to talk to your tax preparer or attorney to see if your business-related legal fees qualify as a deduction.  As a bonus, though, you can also deduct any legal fees incurred for getting tax advice from a lawyer!  And by the way, this last one works for both businesses and individuals.

So, even though you can’t deduct legal expenses that are purely personal, there are some instances in which legal gains may be tax deductible.  For example, if you get alimony or child support payments but you aren’t receiving them, you may be ale to write off legal fees that you acquire in the pursuit of payment.  You may even be eligible to write off the expense of resolving legal issues concerning your taxes.  But you’ll really need to check with the IRS or an attorney to see if you qualify.  So whether you’re hiring a Charleston South Carolina Attorney or one in Los Angeles, California, you should know that your personal legal expenses are what they are.  But if you happen to be paying a lawyer for anything business-related, you can definitely get a break on your taxes.

Elizabeth Retton is a contributing writer for Howell and Christmas, a law firm specializing in accident and personal injury law.

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