No one enjoys paying attorney fees and even fewer enjoy paying income taxes. What you need to know is in some circumstances your payment of attorney fees is tax deductible. Internal Revenue Code Section 212 provides: “In the case of an individual, there shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year- … (2) for the management, conservation, or maintenance of property held for the production of income….”
Note however, that attorney fees paid to resist your spouse’s claims on your income producing assets are probably not deductible per a 1962 U.S. Supreme Court case, U.S. v. Gilmore (1962) 372 U.S. 39, 9 L.Ed.2d 570, 83 S.Ct. 623.
Fees incurred in defending title to income producing capital assets may qualify to be additions to the tax basis of the asset, not a tax deduction.
Deducting divorce attorney fees on a tax return is probably most widely utilized in the arena of spousal support. The portion of the total fees which are fees incurred for the production of taxable income, e.g. to obtain spousal support, are deductible. “In the case of an individual, there shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year- (1) for the production or collection of income….” (Int.Rev. Code §212 (1).)
Even if the fees you paid were for an unsuccessful attempt to secure spousal support they may be deductible. Yet, fees paid to reduce spousal support are not deductible.
As a practical matter you will need detailed billing statements from your attorney to support your claim concerning what portion of the fees are (a) related to the operation of the taxpayer’s business having a legitimate business purpose, or (b) incurred for the production or collection of income (e.g. spousal support). Expect to work with your attorney and your tax accountant to determine whether any of the limited circumstances are available to save you some state and federal tax liability. The attorneys at Burke & Domercq, APC, APC in Carlsbad, San Diego County will help steer you in the right direction and help you identify issues which may save you money. Call us at 760.434.3330; www.dburkelaw.com”
