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Tax Deduction Consulting: Legal Expenses Bismarck ND

To understand this distinction, the legal fees involved in the dissolution of a marriage provide a good example. The legal fees paid to a lawyer to handle divorce proceedings would be considered purely personal legal fees and would not be tax deductible.

H&R Block
(701) 250-0960
2717 ROCK ISLAND PL
BISMARCK, ND

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Liberty Tax Service
(866) 871-1040
113 Main Ave E
West Fargo, ND

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H&R Block
(701) 241-7628
1531 S UNIVERSITY dr
FARGO, ND

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Liberty Tax Service
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312 University Dr N
Fargo, ND

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Petrick & Youngs Tax Svc Inc
(701) 852-6274
624 31st Ave SW
Minot, ND

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Liberty Tax Service
(866) 871-1040
500 W Main St
Mandan, ND

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Accounting 4 Success
(701) 371-0419
3320 Westrac Drive
Fargo, ND
 
Liberty Tax Service
(866) 871-1040
3005 13th Ave S
Fargo, ND

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H&R Block Inside Times Square West
(701) 282-4570
5050 13TH AVE S
FARGO, ND

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Liberty Tax Service
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500 W Main St
Mandan, ND

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Tax Deduction Consulting: Legal Expenses

Legal Expense Tax Deduction

Legal fees are limited as tax deductions. A legal expense tax deduction is only granted to fees for disputes arising form business or income producing affairs. Personal legal fees are not deductible.

When a legal dispute occurs as a result of business activity or as a result of some matter that is related to the producing of income, the legal fees may be taken as a legal expense tax deduction. This is itemized as a miscellaneous tax deduction and is subject to the 2% Adjusted Gross Income floor. Personal legal fees are not tax deductible.

To understand this distinction, the legal fees involved in the dissolution of a marriage provide a good example. The legal fees paid to a lawyer to handle divorce proceedings would be considered purely personal legal fees and would not be tax deductible. However, if the divorce involved the collection of alimony and the alimony was going to be considered as taxable income, the portion of the legal fees paid for this purpose would be deductible. It would be necessary for the lawyer to make a statement detailing what portion of his fee was attributable to the alimony collection.

Another example would involve personal injury suits. If the reward for the personal injury suit was considered taxable income, the legal fees would be deductible. Some personal injury suits do not involve taxable income and, in this case, the legal fees would not be taxable. This would be the same with legal fees regarding a Will dispute. Since any inheritance would not be income that would be reported and taxed on your income tax return, the legal fees would not be deductible.

The principle involved here is actually that the legal fees are considered much the same as a business expense. In a business model, you are only taxed on the profit that you make. If you buy a product for $10, sell it for $15, and pay your salesman $2, you have made a profit of $3. It is the $3 that is subject to tax, not the entire $15 you re...

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