Divorce proceedings can be excessively expensive – but can they contribute to your tax return? This article will break down whether you can claim divorce attorney fees on your taxes. We’ll also explore the impact that itemized deductions may have on your tax return.
Why Claim Divorce Attorney Fees on Taxes in the First Place?
Both parties in a divorce typically pay for separate lawyers. There may be a number of meetings required to divvy up possessions or assets. And proceedings can drag on for quite a long time if one or both spouses cannot agree easily. A protracted divorce proceeding can result in a significant amount of legal fees.
Because of these expenses, many individuals wonder whether they can claim the legal fees from their divorce proceeding on their taxes. In this way, they might enjoy a higher tax return or be taxed on less income. Obviously, no one wants to pay more in taxes than they are legally required to pay.
Recent Changes to Tax Deductions
While it may have been possible to deduct certain divorce attorney fees on taxes or other expenses from divorce proceedings before 2017, the Tax Cuts and Jobs Act or TCJA changed that. Signed into law by then-President Trump, the TCJA significantly changed the deduction types and amounts individuals could claim on annual tax returns from 2018 on.
For example, before the TCJA, individuals who owed legal fees that related to business income could deduct the fees under Tax Code Section 212. This deduction is now suspended until 2025 per the TCJA.
Divorce Attorney Fees – Are They Tax Deductible?
So, can you deduct divorce attorney fees on your taxes? No, unfortunately.
The IRS does not allow individuals to deduct any costs from:
- Personal legal advice, which extends to situations beyond divorce
- Legal action during a divorce
So the money you spend on your attorney to make sure you get the best deal out of your divorce, although it’s money well spent, is not tax-deductible. The IRS, regardless of the details of your specific case, considers the money spent on divorce to be “personal spending”, as it’s not always directly related to a business, inheritance, or retirement plans.
Read more in our blog: Attorney Fees and Costs in Florida: What Changed in 2023?
Exceptions to the Rule
That being said, there are several potential exceptions to the above rule. It all lies in the intricacies of itemizing your deductions.
In a nutshell, you are allowed to itemize your deductions on your annual tax return provided that the “miscellaneous” deductions account for more than 2% of your AGI or adjusted gross income. In other words, your miscellaneous deductions combined have to be more than 2% of the income for which you are projected to be taxed.
If your itemized deductions don’t pass the 2% AGI test, you can’t deduct any of the legal costs outlined below. But if they do, read on!
Fees for Tax Planning If the Planning Is Related to Business
If during your divorce proceedings, you pay fees for tax planning related to your business, they might be deductible through itemized deductions.
For example, say that you meet with your CPA (certified public accountant) during your divorce in order to determine the ideal property settlement payout for a building you and your spouse share to run a business. In this case, you can deduct those legal fees since they are tangentially related to business operations.
However, you can’t deduct legal fees related to splitting property for residential uses only. So if you are trying to split up the property settlement for a house you and your spouse share, the legal fees from that meeting will not be deductible.
Fees for Obtaining Taxable Income
If you are the spouse trying to obtain taxable income, including spousal support like alimony or child support, the fees from those legal efforts may be individually deductible. This is a little more complicated now than it was before. The TCJA removed the requirement for spouses receiving alimony to report that money as income.
But this may still apply in your case or your state. To determine whether these fees are truly deductible, speak to a family law attorney or accountant and get their opinion on the matter.
Read more in our blog: What Is the Difference Between Spousal Support and Alimony in Florida?
Fees for Securing Interest in a Qualified Retirement Plan
Lastly, you may be able to individually deduct the fees that you paid for securing interest in a qualified retirement plan. For example, you may wish to divide the contribution plan between you and your spouse.
If you meet with an accountant or a specific legal expert to work out an agreeable plan between you and your spouse, the fees from that meeting specifically could be deductible. The fees for the broader divorce proceedings, of course, are not.
What if Your Spouse Is Deliberately Trying to Increase Divorce Costs?
Sometimes, divorces can be messy. One of the partners may deliberately try to increase the costs of divorce proceedings as a way to get back financially at the other partner.
If you can acquire proof of this, your attorney may be able to ask your divorce judge to order your spouse to pay for those legal fees. However, you still won’t be able to deduct them from your taxes. You’ll need to settle this particular financial quibble in court.
Contact Family Law Attorneys in Tampa, FL Today
It can be tough to determine whether you can deduct any of the fees from your divorce proceedings, legal meetings, or accounting work during a divorce. That’s just one of the many reasons why it’s a good idea to speak to skilled family law attorneys ASAP.
Family law attorneys like Hunter Law are well equipped and ready to help you navigate the intricacies of your divorce proceedings with grace. Divorce can be a tough time for anyone, but you don’t have to go through it alone. With our help, you’ll put together a strong case for your personal objectives. We can work with you and help you get through your divorce with a minimum of hassle and financial mess.
Contact Hunter Law today for more information and a free consultation. 813-287-2227.