Attorneys’ Fees – Are they Deductible?
The good news for taxpayers is that attorneys’ fees in relation to tax services for individuals and small business issues are deductible!
The basic rule is that attorneys’ fees are taxable if incurred to:
- Produce or collect taxable income; or
- Help determine, collect, or obtain a tax refund.
Simply put, you can deduct an attorney’s help to make money that you’ll have to pay taxes on; or if an attorney helps you with a tax matter such as an audit, back taxes, etc. For small businesses, you can deduct incorporation fees, tax planning, bookkeeping services, etc.
Examples of Deductible Attorneys’ Fees
Examples of fees that would be deductible are:
- Estate tax planning
- Fees incurred to defend yourself in an employment-related lawsuit, or to file a lawsuit against an employer
- Tax preparation
- Representation in a tax audit
- General tax planning
- Negotiating or drafting contracts
- Collecting money owed to you by a customer
Examples of Non-deductible Attorneys’ Fees
Attorney fees such as the following are not deductible:
- Filing a personal injury lawsuit
- Drafting a will or settling a probate matter
- Obtaining custody of a child
- Non-tax issues in a divorce
- Name changes
- Civil suits that are not work or business related