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Are Legal Fees Tax Deductible?
It can be quite expensive to hire an attorney. Is it possible to take a deduction for legal fees on your tax return? While attorneys’ fees are not automatically tax deductible, there are some cases where they can be taken as itemized deductions.
If you are hiring a lawyer to assist you with an income-producing activity, your legal fees are most likely deductible. Common situations include legal issues concerning your business, employment, or a property that you rent out.
There are also situations where a portion of your legal fees can be tax deductible. A common situation where this can happen is a divorce case. The fees paid involving your separation or divorce are not deductible, because these fees have nothing to do with income. However, if you are taking legal action to collect alimony, these fees may be tax deductible. It is important that your attorney separate the final bill to indicate what fees are related to that collection activity.
It is a mistake to make an assumption one way or the other regarding tax deductions. If you have any questions, it is a good idea to consult with an accountant or tax attorney. The good news? Fees incurred in the preparation of taxes are tax deductible!
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