What Legal Fees Can I Deduct?

Legal fees concerning real estate rental properties or businesses are properly deducted on the schedules for those activities.

On Schedule A, as a miscellaneous itemized deduction, you can generally deduct legal fees related to:

Investment property that produces taxable income.
Work-related civil lawsuits, needed to safeguard your employment.
Tax advice or audit representation.
Collection matters if the resulting income will be taxable (i.e., alimony, punitive damages, recovery of income, etc.).

You cannot deduct personal legal expenses, such as expenses of drafting a will or trust, divorce proceedings, collection of child support, or matters involving income exempt from income tax.

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