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Can I Deduct My Lawyer’s Fees in My Divorce?

Can I Deduct My Lawyer’s Fees in My Divorce?
Can I Deduct My Lawyer's Fees in My Divorce?

I’ve heard that lawyer fees can be deducted from income on your tax return, but my divorce lawyer told me that I can’t claim the amount I paid her because it wasn’t income-producing. Who should I believe? And does it matter?

The answer to the first part of this question depends on whether you pay your lawyer directly or have your spouse reimburse you after the divorce settlement has been agreed upon.

Lawyers’ fees for a divorce can be difficult to calculate, but the basic rules are as follows:
1. If you’re represented by an attorney, you can’t deduct your lawyer’s fees from what you pay him or her.

2. If you represent yourself and use your own funds, those lawyer fees may be deductible. 3. If a spouse pays for his or her own representation, then the attorney fee may be deducted from the income of the spouse who pays it.

4. A self-represented party can deduct legal expenses that he or she incurs while preparing his or her case if they are not reimbursed by any other person (including reimbursement out of court settlement proceeds).

Tax Deductions for Attorney’s Fees

When it comes to tax deductions for attorney’s fees, there are two ways you can approach your divorce. The first is to have the court order your spouse to pay for all of your legal fees. If this is the case, you will not be able to deduct any of them from your taxes.
The second way is if you pay the lawyer up front and then get reimbursed later. In this instance, it may be possible to deduct these costs by claiming them as a miscellaneous itemized deduction on Schedule A of Form 1040. However, this deduction would only be available if you itemize deductions on your tax return instead of taking a standard deduction on line 39a of Form 1040.

The Problem with Deducting Attorney’s Fees in Divorce

If you are the spouse who hires a lawyer and pays for his or her fees, you may be able to deduct your lawyer’s fees on your taxes. You must meet three requirements to do so:

1) you must pay for your lawyer with pre-tax dollars;

2) the divorce must be considered related to employment; and

3) the divorce must end a marriage that lasted 10 years or less.

To find out if your divorce is related to employment, take note of what type of spouse is paying for the lawyers.

If it’s an individual who is employed by their spouse’s business or earns income from property they share with their spouse, then it is likely related to employment.

Can I Deduct My Lawyer’s Fees in My Divorce?

In most cases, lawyer fees are not tax deductible because they are considered personal expenses. However, there are some exceptions to this rule.

If you have a divorce that involves property division, child custody or support, or spousal maintenance (alimony), the court can order your spouse to pay your legal fees and these may be considered deductible.

In addition, if you had an attorney help with the division of assets from a business where one of you was self-employed and you were paying them out of post-tax income, then the fee may be considered tax deductible.

Finally, if there is domestic violence involved in your divorce case and it was approved by the court as part of the settlement agreement, then many states allow for a deduction for legal fees.