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Tax Deduction Consulting: Legal Expenses Sioux Falls SD

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.

Liberty Tax Service
(866) 871-1040
1520 W 12th St
Sioux Falls, SD

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Liberty Tax Service
(866) 871-1040
5216 W 26th St
Sioux Falls, SD

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Mr. Todd M. Klein (RFC®), CFP
(605) 348-2433
1241 E St. Joseph St
Rapid City, SD
Company
Fintegra, LLC
Qualifications
Years of Experience: 19
Membership
IARFC
Services
Invoice, Estate Planning, Portfolio Management, Retirement Planning, Tax Planning, Tax Returns, Stocks and Bonds, Mutual Funds, CD Banking, Annuities, Life Insurance, Disability Income Insurance, Long Term Care Insurance, Education Plan

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H&R Block
(605) 332-8081
4601 E ARROWHEAD PKWY STE 101
SIOUX FALLS, SD

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H&R Block
(605) 362-2567
3400 EMPIRE MALL
SIOUX FALLS, SD

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H&R Block
(605) 362-2567
3400 EMPIRE MALL
SIOUX FALLS, SD

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H&R Block
(605) 332-8081
4601 E ARROWHEAD PKWY STE 101
SIOUX FALLS, SD

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Liberty Tax Service
(866) 871-1040
1943 Dakota Ave S
Huron, SD

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Liberty Tax Service
(866) 871-1040
633 E Sioux Ave # 6
Pierre, SD

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Liberty Tax Service
(866) 871-1040
532 E Anamosa St
Rapid City, SD

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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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