What Legal Fees Can I Deduct?

Legal fees concerning real estate rental properties or businesses are properly deducted on the schedules for those activities.

On Schedule A, as a miscellaneous itemized deduction, you can generally deduct legal fees related to:

  • Investment property that produces taxable income.
  • Work-related civil lawsuits, needed to safeguard your employment.
  • Tax advice or audit representation.
  • Collection matters if the resulting income will be taxable (i.e., alimony, punitive damages, recovery of income, etc.).
You cannot deduct personal legal expenses, such as expenses of drafting a will or trust, divorce proceedings, collection of child support, or matters involving income exempt from income tax.

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