Looking For a Tax Deduction?
As 2015 comes to a close, April 15, 2016 is just around the corner. It’s still not too late to get tax deductions for 2015! The IRS recognizes legal fees as tax deductible if they are paid (cash, check or credit card) on or before December 31, 2015, in association with a business or trade, are incurred in an attempt to produce or collect taxable income, or are associated with determining, collecting and refunding income tax or tax advice.
Business-related legal fees are most commonly deductible. Generally, legal fees stemming from the carrying-on of a trade or business qualify as a business legal expense and are tax deductible. Non-traditional legal fees can also be deducted as a business expense, such as fees paid for defending against criminal charges that stemmed from your trade or business, or fees associated with wrongful termination or unlawful discrimination claims.
Personal legal fees can also be deducted if they are incurred for: (1) the production or collection of income; (2) the management, conservation or maintenance of property held for the production of income; or (3) tax advice and tax planning. This can include legal fees for estate planning and administration, civil suits, divorce proceedings which attempt to collect alimony, tax planning, and/or any other case involving taxable income. These fees qualify as miscellaneous itemized deductions (subject to a floor of 2% of your adjusted gross income).
Legal Fees attributable to Estates and Trusts are also deductible, under many of the same principles and rules governing businesses and individuals.
If you have any questions regarding your tax situation for 2015 or with regard to the deductibility of your legal expenses, please feel free to contact one of our tax attorneys at 215-646-6000.