Can I Deduct My Attorney Fees From My Divorce?

Can I Deduct My Attorney Fees From My Divorce?

It is possible in some limited circumstances.

Let me preface this article by saying that I am in no way a tax expert and you should consult with your tax advisor on your specific situation.

With that being said, yes, attorney fees for a divorce can be deductible.  Attorney fees, along with other litigations costs, are only deductible to the extent that they are incurred to produce taxable income.  For example, if you incurred attorney fees to secure an award of maintenance and that maintenance award is taxable as income, which it generally is, then you can deduct a portion of your attorney fees and litigation costs.  Likewise, if you incurred attorney fees to modify a maintenance award, you may be able to deduct your fees.

Conversely, since child support is non-taxable, you can never deduct your attorney fees incurred to pursue a child support claim or modification.  However, you can always go through your local county attorney office for free child support enforcement assistance.

Other areas where attorney fees in a divorce may be tax deductible include fees incurred to secure a portion of a spouse’s retirement account, since the account payments will be taxable when they are withdrawn.  If the retirement account was generated with taxed income and is not taxable upon withdrawal, then the fees are probably not deductible.  You may also be able to deduct your fees if they were incurred to secure things like rights to patents, royalties, and other similar assets that will generate taxable income for you.

The right to deduct your attorney fees is not total.  The attorney fees can be deducted as miscellaneous itemized deductions.  Sorry, if you take the standard deduction you are out of luck.  Additionally, the fees are only deductible to the extent in which they exceed 2% of your adjusted gross income.

As you can see, this is a very complex area and I would reiterate that you should never try to deduct your attorney fees without first discussing it with your accountant.  Your accountant may want you to request a letter from your attorney to specifically designate what portion of the attorney fees were incurred to produce taxable income because such a letter or other statement will likely be required by the IRS if there is ever a dispute.  Since many attorneys move their files to storage upon completion of the case, the sooner you ask for that documentation, the better.

Photo courtesy of Ken Teegardin

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