Can You Write Off Attorney Fees on Your Taxes?

Attorney fees can be a significant expense. Their deductibility on your taxes involves specific Internal Revenue Service (IRS) rules. While many legal expenses for personal matters are not deductible, certain circumstances allow for a tax write-off, depending on the purpose for which the fees were incurred.

Understanding Deductibility Rules

The deductibility of attorney fees distinguishes between personal and income-related expenses. Legal fees for personal reasons are generally not deductible, while those directly related to a trade or business or the production of taxable income may be.

The Tax Cuts and Jobs Act (TCJA) of 2017 significantly impacted the deductibility of many legal fees. For tax years 2018 through 2025, the TCJA eliminated miscellaneous itemized deductions, which previously included many legal fees not directly tied to a business or specific income-producing activities.

Tax deductions are categorized as “above-the-line” or “itemized.” Above-the-line deductions are subtracted from gross income to arrive at your AGI and can be claimed even if you do not itemize. Itemized deductions are claimed on Schedule A (Form 1040) and are beneficial only if their total exceeds your standard deduction. The TCJA’s elimination of many miscellaneous itemized deductions reduced the number of taxpayers who benefit from itemizing.

Specific Deductible Scenarios

Attorney fees are deductible in specific situations, primarily when they are ordinary and necessary expenses related to a business or income-generating activities. The nature of the legal action, not its outcome, determines deductibility.

Business Expenses

Legal fees directly related to carrying on a trade or business are generally deductible. These are considered ordinary and necessary expenses if they are common and accepted in your industry and are appropriate for your business operations. Such fees often support income-producing activities.

Deductible business legal expenses include fees for:
Contract disputes
Intellectual property protection
Regulatory compliance
Defending your business in a lawsuit
Negotiating with suppliers
Resolving employment disputes
Setting up a business entity (e.g., LLC or corporation)
Drafting operating agreements

Income-Producing Property

Legal fees incurred for the production or collection of taxable income, or for the management, conservation, or maintenance of income-producing property, are deductible. This includes legal expenses for rental properties, such as those related to eviction proceedings or contractual disputes with tenants. However, legal fees to acquire or improve property are not immediately deductible; these costs must be capitalized.

Whistleblower Awards

Attorney fees paid in connection with certain whistleblower awards are deductible as an “above-the-line” adjustment to income. This applies to awards under federal whistleblower statutes, such as the False Claims Act or the IRS whistleblower program. The deduction is reported on Schedule 1 (Form 1040) and cannot exceed the award amount included in your income for the tax year.

Discrimination Lawsuits

Legal fees and court costs paid in connection with certain unlawful discrimination lawsuits are also eligible for an “above-the-line” deduction. This applies to claims under federal, state, and local anti-discrimination laws. The deductible amount is limited to the judgment or settlement amount included in taxable income.

Tax Advice and Preparation

Fees paid for tax advice, tax preparation, or representation before the IRS are generally deductible. If these services relate to your business, they are deductible as a business expense. For individuals, tax preparation fees are no longer deductible through 2025 due to the TCJA. However, for self-employed individuals and small business owners, tax preparation costs related to their business, such as those for Schedule C or Schedule F, remain deductible. Only the portion of fees directly related to the business return is deductible.

Non-Deductible Legal Fees

Many attorney fees are not deductible because they are considered personal expenses. The “origin of the claim” test often determines deductibility; if the legal issue’s root is personal, the fees are usually nondeductible.

Legal costs associated with personal matters, such as divorce, child custody, or adoption, are not deductible. Fees incurred for drafting a will or for personal injury lawsuits are also generally not deductible. Even if a personal injury settlement is taxable, the legal fees might not be deductible if the award is excluded from income.

Fees for defending against criminal charges are generally not deductible for individuals, as they are considered personal. However, if the criminal charges arise directly from business activities, the legal fees may be deductible as a business expense. Legal fees incurred in acquiring personal assets, such as buying a home, are also not deductible.

Furthermore, legal fees that are considered capital expenses must be added to the cost basis of the property rather than being immediately deducted. This includes fees for acquiring, perfecting, or defending title to property, or for improvements that add value or extend the useful life of an asset. These costs are recovered through depreciation or when the asset is sold.

Claiming the Deduction

Once attorney fees are determined deductible, the method of claiming the deduction depends on the expense type. Proper reporting on your tax return is essential.

For above-the-line deductions, such as attorney fees for whistleblower awards and discrimination lawsuits, these amounts are reported on Schedule 1 (Form 1040). These deductions reduce your adjusted gross income, which can impact other tax calculations.

Business-related legal fees are typically reported on Schedule C (Form 1040), Profit or Loss from Business, as ordinary and necessary business expenses. For rental property legal fees, they are generally reported on Schedule E (Form 1040), Supplemental Income and Loss.

Few remaining itemized deductions might include legal fees, such as tax advice fees not covered as a business expense. These would be reported on Schedule A (Form 1040), Itemized Deductions. Most miscellaneous itemized deductions, including many legal fees, were suspended from 2018 through 2025 due to the TCJA.

Thorough record-keeping is important for substantiating claimed deductions. Retain all invoices from attorneys, payment records, and detailed descriptions of services rendered. These documents provide evidence to support your deduction in case of an IRS inquiry.