Legal fees are always a pain to deal with. There are a lot of complex rules on what you can deduct and what you can’t. The answer is that only certain lawyer fees can be written off on your taxes. In most circumstances, though, you will have to count them as a personal expense. When counted as such they are not deductible.
Let’s discuss how to work out whether you can write something off or not.
Is it Personal?
This is the crucial question you have to answer. Personal legal fees aren’t tax deductible and will therefore leave you in a situation where you can’t deduct them from your taxes.
A prime example of a personal lawyer fee is the fee you pay to get divorced. Also, if you have any cases for slander you would be forced to cover this out of your own pocket. The reasoning behind this is that it’s purely a personal decision and you are not strictly forced into it.
Business Lawyer Fees
If you require a lawyer for the purposes of investment, you can deduct them from tax returns. This applies to everyone from sole businesspeople to huge corporations. From a personal finance perspective, these are the best legal fees around.
For example, if you require a lawyer to improve the reputation of your business, these fees would be fully tax deductible.
If you are unsure about any of this, speak to a tax professional. They will be able to assess whether something is deductible or not. Unsure about it? Stay on the side of caution and don’t deduct it.
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