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Are Tax Attorney Fees Deductible?

Introduction

Tax attorney fees can be expensive, and it's only natural to wonder whether you can deduct them from your taxes. The answer is not straightforward, as it depends on the circumstances. In this article, we will explain when tax attorney fees may be deductible and what you need to know to claim the deduction.

When Are Tax Attorney Fees Deductible?

Tax attorney fees are generally deductible if they are related to the production, collection, or refund of taxable income. For example, if you hire a tax attorney to assist you with an IRS audit or to help you negotiate a settlement with the IRS, the fees you pay may be deductible. Similarly, if you hire a tax attorney to help you prepare your tax return or to advise you on tax planning, the fees may be deductible.

Limitations on Deductibility

There are some limitations on the deductibility of tax attorney fees. For example, you can only deduct fees that exceed 2% of your adjusted gross income. Additionally, if you receive a settlement or award that includes reimbursement for attorney fees, you cannot deduct those fees from your taxes.

Alternative Minimum Tax

If you are subject to the alternative minimum tax (AMT), you may not be able to deduct tax attorney fees. This is because the AMT does not allow certain deductions that are allowed under the regular tax system, including deductions for tax attorney fees.

Other Legal Fees

It's important to note that tax attorney fees are not the same as other legal fees, such as fees paid to a divorce attorney or a personal injury lawyer. These fees are generally not deductible, unless they are related to the production, collection, or refund of taxable income.

Documentation

If you plan to deduct tax attorney fees, you will need to keep careful documentation. This includes invoices, receipts, and any other documents related to the fees you paid. You should also keep a detailed record of the services provided by your tax attorney and how they relate to the production, collection, or refund of taxable income.

Conclusion

In summary, tax attorney fees may be deductible if they are related to the production, collection, or refund of taxable income. However, there are some limitations on deductibility, and you will need to keep careful documentation to claim the deduction. If you have any questions about whether your tax attorney fees are deductible, it's best to consult with a tax professional.

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