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

Are Tax Attorney Fees Deductible for Estate Planning?

Introduction

Estate planning is an important aspect of managing your assets and ensuring that they are passed down to your loved ones according to your wishes. However, the process can be complex, and many people seek the assistance of a tax attorney to navigate the tax implications of their estate plan. One question that often arises is whether tax attorney fees are deductible for estate planning purposes. In this article, we will explore this topic in detail.

The General Rule

The general rule is that legal fees are deductible only 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. Estate planning legal fees generally do not fall under these categories and are therefore not deductible.

Exceptions

However, there are some exceptions to this general rule. For example, legal fees incurred for tax advice in connection with the preparation of estate tax returns are deductible. Additionally, legal fees incurred for the administration of an estate, such as fees paid to an attorney for probating a will or administering a trust, are also deductible.

Recent Changes

It is worth noting that the Tax Cuts and Jobs Act (TCJA) of 2017 made some significant changes to the tax code that affect the deductibility of legal fees. Under the TCJA, miscellaneous itemized deductions, which include legal and tax preparation fees, are no longer deductible for tax years 2018 through 2025. This means that even if legal fees for estate planning purposes fall under one of the exceptions mentioned above, they may not be deductible.

Alternative Options

If you are concerned about the cost of legal fees for estate planning, there are alternative options to consider. One option is to use online estate planning services, which can be more affordable than hiring a tax attorney. Another option is to work with a financial planner or accountant who can provide guidance on the tax implications of your estate plan.

Conclusion

In conclusion, tax attorney fees for estate planning purposes are generally not deductible. However, there are some exceptions to this rule, and it is important to consult with a tax professional to determine if your specific situation qualifies for a deduction. Additionally, recent changes to the tax code may further limit the deductibility of legal fees. As always, it is important to carefully consider your options and work with a qualified professional to ensure that your estate plan is in line with your wishes and meets all legal requirements.

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