Property & Finances
Are Legal Fees for Divorce Tax deductible?
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| Are Legal Fees for Divorce Tax deductible? |
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The bad news is that typically fees associated with a divorce are not deductible. However, there is a silver lining to the bad news. While the IRS does state that legal fees associated with a divorce are not deductible, you can deduct a few other expenses that are typically involved in a divorce process assuming you follow the proper IRS rules. For example, you can generally deduct a portion of the legal fees associated with collecting alimony. While alimony is usually awarded as part of the divorce, the pursuit of alimony initially is not deductible. However, enforcing an order to pay alimony is deductible as long as the alimony sought is taxable to the spouse seeking the alimony. This means that if the alimony is not taxable to the spouse seeking the alimony then that spouse is unable to deduct the expenses of collecting the alimony. Another area where a potential write-off is hiding is in the tax advice. Most divorcing couples seek tax advice at some point to help them determine the best course of action legally in regards to filing taxes. This is especially common if children are involved and you are seeking advice on the best way to handle the deductions that accompany those children. While the tax advice itself is allowed to be deducted, it is only allowed if you are seeking advice for your own tax situation.It is not allowed to be deducted if you are seeking tax advice about Great Aunt Milly’s estate because you are helping her. In addition, if you pay for your spouses’ tax advice for some reason, it is not deductible because you did not receive the advice yourself about your particular case.
Another issue where you can find a deduction is from your attorney. Many attorneys provide tax advice to their clients as well as helping in the divorce. If your attorney does this then make sure, you ask for a detailed bill that is itemized and broken down. You will need a detailed bill in order to be able to deduct the portion that is allowed. Without the itemized bill, you will not be allowed the deduction according to the IRS rules. As you can see, while the divorce itself is not allowed to have deduction there will be some deductions that can be taken as long as the proper IRS rules are followed. If you have, any doubts about whether a deduction is allowed you should consult with your attorney, or a tax professional in your area. Try to seek out a tax professional who works year around and not just at tax time as well in order to receive the most accurate advice possible. While many places offer tax services, others only offer advice around the tax season. You should seek advice as far in advance of the tax season as possible so that you will be prepared. You will likely need time to gather all of the necessary documents in order to claim deductions. If you do not have the required paperwork, you may have a problem getting an accountant to allow the deduction in order to best protect yourself. Remember, while the job of the tax professional is to provide advice it is generally best to follow the advice if possible. Stick to only the allowed deductions and your post-divorce taxes should be quite simple to handle. With good tax advice, you will be able to save the maximum amount possible, while still staying within the legal guidelines. Just remember, no actual deductions are allowed period for the divorce process itself. |
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