Tax Tips: A Lawyer a Day Keeps Taxes Away

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If you used a lawyer to protect your assets last year, then you might be in line for a deduction.

You can deduct legal fees paid to collect or produce taxable income, or to protect your current job or your future employment. This includes legal fees paid to collect alimony, reduce alimony, keep your job or maintain your job or salary status. Legal fees related to both taxable and non-taxable income, such as Social Security benefits, must be allocated appropriately.

Because child support is not taxable income any legal fees relating to collecting overdue child support payments are not deductible.

Contingent legal fees and expenses deducted from a legal award, judgment or settlement are deductible. Awards, judgments and settlements from actions involving physical injuries are not included in taxable income, so related legal fees and expenses are not deductible.

Legal fees and expenses related to taxable awards, judgments and settlements from unlawful discrimination lawsuits, certain claims against the federal government and private causes of action under the Medicare Secondary Payer law are deductible above the line as an adjustment to income and not as a miscellaneous expense on Schedule A.

New Jersey tax pro Robert D. Flach has been preparing 1040s for individuals since 1972.

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