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

Are Tax Attorney Fees Deductible Property?

Introduction

As a taxpayer, it is important to know what expenses are deductible on your tax return. One of the questions that frequently arises is whether tax attorney fees are deductible property. In this article, we will explore this topic in detail and provide you with the information you need to make an informed decision.

What are Tax Attorney Fees?

Tax attorney fees are fees that are paid to an attorney for legal services related to tax matters. These fees may be incurred in a variety of situations, such as when you need to file a tax appeal, negotiate a settlement with the IRS, or defend yourself in a tax audit.

Are Tax Attorney Fees Deductible?

The answer to this question is not straightforward. In general, tax attorney fees are deductible if they are incurred for the production or collection of taxable income, or for the management, conservation, or maintenance of property held for the production of income. For example, if you hire a tax attorney to help you with a tax matter related to your rental property, the fees you pay may be deductible as a rental expense. Similarly, if you hire a tax attorney to help you with a tax matter related to your business, the fees you pay may be deductible as a business expense. On the other hand, if you hire a tax attorney to help you with a personal tax matter, such as a divorce or a dispute with a neighbor, the fees you pay are generally not deductible.

Limitations on Tax Attorney Fee Deductions

Even if your tax attorney fees are deductible, there may be limitations on the amount you can deduct. For example, if you are an individual taxpayer, you can only deduct tax attorney fees that exceed 2% of your adjusted gross income. If you are a business taxpayer, there may be other limitations that apply.

Alternative Deductions for Tax Attorney Fees

If your tax attorney fees are not deductible as a business or rental expense, there may be other deductions that apply. For example, you may be able to deduct the fees as a miscellaneous itemized deduction on Schedule A of your tax return. However, this deduction is subject to the 2% floor mentioned above.

Conclusion

In conclusion, tax attorney fees may be deductible property in certain situations. If you are unsure whether your tax attorney fees are deductible, it is best to consult with a tax professional. They can help you determine whether your fees are deductible and, if so, how much you can deduct.

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