Today TaxMama hears from Jan in Michigan who tells us “I’m recently divorced. Can I deduct any of my legal fees on my 2008 tax return?”
Generally, divorce costs are not tax deductible. They are personal expenses.
However, if the legal fees for your divorce were more than the basic fees, some of the fees may be deductible. This is what is deductible:
Fees to get you income-producing assets, like a share of his pension plan or IRA, a share of the business, an alimony judgment, a share of a rental property.
This is what’s not deductible: Child support, splitting the home
Here’s what you do to determine if the legal fees are deductible:
1) Copy the law firm’s invoices and read the copies carefully. (If the invoices don’t spell out what the firm worked on for each billable hour, you may need to ask them for a breakdown.)
2) Highlight all the fees for the time spent working on deductible activities and add them up.
3) Keep this copy, with all your notes in your 2008 tax return file.
It works. In fact, I reopened an audit for one client and convinced IRS to reverse their original decision to disallow nearly $100,000 worth of legal fees over two years. Just pay attention to the details.
And remember, you can find answers to all kinds of questions about divorce and other tax issues, free. Where? Where else? At TaxMama.com[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.]
- Ask TaxMama :: Where taxes are fun and answers are free
- www.TaxQuips.com :: The number ONE free tax podcast online