If you are going through a court case, you understand just how aggravating legal fees are. It is not unusual for anyone to pay tens of thousands of dollars in legal fees, sometimes out of pocket. Even if your insurance covers a portion of the legal fees, you are still stuck with paying a portion. To add insult to injury, the U.S. federal government still taxes you. There is a way to seek tax deductibility of legal fees. While controversial and not specifically addressed by law, tax deductibility of legal fees is possible if you do a little research.
To be fair, no part of the U.S. tax code provides for you to deduct legal fees. Trial lawyers, to be sure, have been lobbying for the tax deductibility of legal fees for years, but are so far unsuccessful at getting a statute past. Indeed, there are thorny policy questions for allowing the tax deductibility of legal fees. For instance, would this encourage more frivolous medical malpractice suits, driving medical expenses even further?
There are ways you can claim a tax deduction for legal fees. Deducting legal fees begins as personal business expense. If you are a sole proprietor or partner of a business, and incur legal fees while conducting a business or trade, you are eligible for a legal fees deductible. Since the code does not define a business or trade, the tax deductibility of legal fees is ambiguous in your favor.
Of course, it you have questions about the tax deductibility of legal fees, you can always ask your lawyer. Your lawyer has a vested interest in ensuring you seek the tax deductibility of legal fees, for that may increase her business. She knows pertinent sections of the tax code, or is allied with an accountant or tax attorney who is. She can provide you clear direction of the tax deductibility of legal fees.
