You can’t deduct personal legal bills such as those
for the following.
1. Custody of children.
2. Breach of promise to marry suit.
3. Civil or criminal charges resulting from a personal relationship.
4. Damages for personal injury (except certain whistleblower claims and unlawful discrimination claims).
5. Preparation of a title (or defense or perfection of a title).
6. Preparation of a will.
7. Property claims or property settlement in a divorce.
You can’t deduct these expenses even if a result of the legal proceeding is the loss of income-producing property.
You can usually deduct legal bills that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax.
You can also deduct legal expenses that are:
1. Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business,
2. For tax advice related to a divorce if the bill specifies how much is for tax advice and it is determined in a reasonable way, or
3. To collect taxable alimony.
You can deduct expenses of resolving tax issues relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F) on the appropriate schedule. You
deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040 or Form 1040NR).
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Ben R Shull CPA LLC provides clients with tax, transaction, and advisory services. The insights and quality services we deliver help lead our clients through the next generation of changes, and accelerate growth while reducing risk. CPA Katy, TX.