Can You Deduct Attorney Fees on Tax Returns?

Posted by Russell West | Feb 08, 2016 | 0 Comments

No one likes having to hire a lawyer, especially when it is due to a criminal charge or wrongful arrest. Perhaps if you could deduct those fees it would at least take out some of the sting, so to speak. Well, there is good news and bad news. The bad news is, you cannot deduct all attorney legal fees. Here are some basics on what you can and cannot claim.

What Legal Fees Can You Claim?

Generally, if you hire a lawyer for the purpose of helping you earn taxable income, then the fees are acceptable. But what does this actually mean? If you search the Internet, you may find other blog posts and even some highly credible sources that claim only a business can deduct legal fees. This is simply not true. According to IRS Publication 529, you may be able to deduct any legal fees “related to doing or keeping your job.”  Here are a few specific examples.

Truck Drivers

Many truck drivers are contractors; therefore, they are able to deduct the cost of an attorney assisting with start-up, business formation, and licensure.

Tax Disputes

Not everyone agrees with his or her taxes. If you own a business and pay usage taxes, hiring an attorney creates a deductible expense.

Professional Licensure

Perhaps a teacher, engineer, or other type of professional is being denied licensure or renewal. Maybe there are allegations that could jeopardize the person's livelihood. Since the license is, in and of itself, something that perpetuates earned income, the attorney fees that are spent protecting it can be deducted.

Businesses

As a general rule, businesses may deduct necessary and reasonable attorney fees that are part of the business's regular operation. So, for instance, a small business owner who owns rental properties may use an attorney for evictions and drafting lease agreements. These would be ordinary expenses that the business owner could deduct. However, if that same business owner pays his attorney to represent him in a divorce, those fees cannot be deducted because they do not relate to earning taxable income.

What Legal Fees Can You Not Claim?

While many legal fees are deductible, there are some that definitely are not. Here are some examples.

DUI Defense

Legal fees can be very expensive, and no one likes having to pay an attorney for defending against bogus charges for a crime you did not commit. Even if you did commit the violation, attorney fees can be a big part of the unintended expenses. But the cost of not having an attorney can far outweigh the cost of hiring an experienced and skilled Spokane DUI lawyer. Nevertheless, you cannot deduct these legal fees on your taxes.

Criminal Defense and Divorce

The IRS does not permit you to deduct legal fees incurred for violating the law, even if you are in business. Truck drivers cannot deduct fees for traffic lawyers, even though it may be necessary to maintain their license. However, some truck drivers have been successful in deducting legal fees associated with license revocation or reinstatement hearings. The nuance is slight, so be sure to consult your tax professional if you have significant legal fees that you think might be deductible. 

About the Author

Russell West

Russell West from West Law Office, located in Spokane, Washington represents clients in areas of criminal traffic, misdemeanors, and personal injury. DUI’s, Reckless Driving, Negligent driving, Hit and Run, and Driving with Suspended license are the majority of criminal traffic violations. Drug Charges, Theft, and Domestic Violence account for most of the other criminal cases Russell handles.

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Spokane Attorney Russell West practice areas include: Auto Accidents, Personal Injury, Motorcycle Accidents, Slip and Falls, DUIs, DOL Hearings, Criminal Traffic, Expungement/Vacating Records, and Insurance Bad Faith,

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