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When are attorney fees tax deductible On what basis? from thelawadvisory.com

Are Tax Attorney Fees Deductible in 2023?

Introduction

Tax season is upon us once again. As you gather your documents and prepare to file your taxes, you may be wondering if you can deduct the fees you paid to your tax attorney. In this article, we will explore whether tax attorney fees are deductible in 2023.

The General Rule

The general rule is that tax attorney fees are deductible as a miscellaneous itemized deduction on your tax return. However, there are some restrictions and limitations on this deduction.

Restrictions and Limitations

Firstly, the deduction for miscellaneous itemized deductions is subject to a 2% floor. This means that you can only deduct the amount of your miscellaneous deductions that exceeds 2% of your adjusted gross income (AGI). For example, if your AGI is $50,000 and your miscellaneous deductions are $1,500, you can only deduct $500 (the amount that exceeds 2% of your AGI). Secondly, tax attorney fees are only deductible if they are related to the production or collection of taxable income. This means that if you hire a tax attorney for personal reasons, such as to help with a divorce or a criminal matter, you cannot deduct the fees.

Exceptions to the Rule

There are some exceptions to the general rule that tax attorney fees are deductible as a miscellaneous itemized deduction. For example, if you are self-employed, you can deduct tax attorney fees as a business expense on your Schedule C. Additionally, if you are involved in a legal dispute related to your job, such as a wrongful termination lawsuit, you may be able to deduct your tax attorney fees as an employee business expense on your Schedule A.

Conclusion

In conclusion, tax attorney fees are generally deductible as a miscellaneous itemized deduction on your tax return. However, there are restrictions and limitations on this deduction, and some exceptions to the rule. If you are unsure whether you can deduct your tax attorney fees, it is best to consult with a tax professional.

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