Tax season is upon us in Texas and the rest of the country. Those who have gone through divorce often wonder if the legal expenses they paid are considered tax deductible. Much to their disappointment, the general rule is that divorce-related expenses are not tax deductible.
However, there are a couple of exceptions to this rule. The first, which we discussed in the last post, is legal fees paid to obtain taxable alimony payments. Check out our previous post for more information, including conditions that apply.
The second exception is for tax-related legal fees that were paid during the divorce process. That means fees for tax research and advice stemming from issues such as alimony, the dependency deduction for children or transferring marital property.
As with the alimony-related deduction and most other miscellaneous deductions, the amount spent on tax-related divorce advice can be tax deductible only in the amount that it exceeds 2 percent of the filer’s adjusted gross income in any one year.
Here are a few other things to keep in mind about this deduction:
- The bill from your attorney must specifically state that the legal fees were for tax-related research or advice.
- Even if the filer paid for the ex-spouse’s legal fees, only expenses related to his or her own tax issues can be deducted.
- To prepare yourself in case of an audit, ask your attorney to write up a bill that identifies legal fees that are tax deductible.
Keep in mind that this is just a basic overview of two exceptions to the general rule that divorce expenses are nondeductible. Additional requirements may apply, so talk to your divorce lawyer for more information.
Source: Huffington Post, “What’s Deductible for Legal Fees When Couples Divorce,” Julian Block, Feb. 3, 2014