NJSBA Family Law Section

 View Only
  • 1.  Are divorce legal expenses tax deductible?

    Posted 03-24-2015 01:15 PM

    My client has asked me what portion of the legal fees he paid qualify as a tax deduction.  His accountant advises that legal fees specifically related to protecting income (reducing alimony payments, child support, property settlement or certain terms in the divorce agreement that reduce the money paid out on an annual basis.).

    Sounds like 100% are deductible then in theory?  I would love to know how others handle this question.  It comes up more and more.
     

    Thank you!

    ------------------------------
    Rosanne DeTorres Esq.
    Flemington NJ
    (908) 284-6005
    ------------------------------



  • 2.  RE: Are divorce legal expenses tax deductible?

    Posted 03-24-2015 03:08 PM
    My understanding is that only counsel fees relative to alimony are the only fees that are deductible. I always refer them to the tax expert.

    Albertina Webb, Esq. , Wilentz, Goldman & Spitzer, P.A., 90 Woodbridge Center Drive, Suite 900, Box 10, Woodbridge, New Jersey 07095-0958 - (732) 855-6162; Fax: (732) 726-4707




  • 3.  RE: Are divorce legal expenses tax deductible?

    Posted 03-24-2015 03:47 PM
    The basic rule is, "Legal expenses in connection with divorce, separation or
    a support decree are personal expenses that cannot be deducted by either
    spouse (Reg Section 1.262-1(b)(7)), except that (1) the part of legal fees
    attributable to the production or collection of taxable alimony is
    deductible by the payee spouse (Reg Section 1.262-1), and (2) taxpayer can
    deduct fees paid to his attorney for tax research and advice relating to a
    divorce and property settlement if the fee for the tax work is segregated,
    but not legal fees he pays to his spouse's attorney for tax advice given to
    the spouse."





    Joanna D. Brick, Esq.

    Law Office of Joanna D. Brick, Esq., L.L.C.

    16-00 Route 208 South, Suite LL1

    Fairlawn, New Jersey 07410

    Phone: 201-773-6880

    Fax: 201-791-5556

    E-mail: [email protected]

    Website: www.joannabricklaw.com <http: www.joannabricklaw.com/="">



    Disclaimer: Please be advised that this message and any attachments or
    enclosures thereto is being transmitted from a Law Firm and shall be
    considered confidential and proprietary of the Law Office of Joanna D.
    Brick, Esq. and its clients, which is only intended for the named
    recipient(s) [individually and as a corporation, entity or law firm] and
    contains information that is privileged, protected from disclosure or
    dissemination, attorney work product or impressions, proprietary or
    otherwise exempt from use or disclosure under various applicable State,
    Federal or Constitutional laws. Transmission of this e-mail alone shall not
    act as a waiver of any legal or evidentiary protections or rights. Further,
    if you are not the intended recipient(s), you are notified that the
    dissemination, distribution, forwarding, cutting and pasting, copying or
    communication of or concerning this message or attachments is strictly
    prohibited. If you receive this message or attachment in error, or are not
    the named recipient(s), please notify the sender at either the e-mail
    address or telephone number above and delete this e-mail and any attachments
    from all computers, servers, directories, storage bins or back-up servers of
    your computer or computer network. Inadvertent receipt of this email and/or
    its attachments shall not constitute a waiver of any privilege, the
    attorney-client privilege or other work product protections, or any IP or
    proprietary rights, or protections of this firm or its clients.




  • 4.  RE: Are divorce legal expenses tax deductible?

    Posted 03-24-2015 03:27 PM
    Hi Roseanne,

    Page 22 of this IRS publication is helpful:

    http://www.irs.gov/pub/irs-pdf/p504.pdf

    It appears only those expenses related to tax advice and those expenses to
    GET alimony are deductible.


    Also, the IRS does not treat child support, ED, etc as income, and those
    would not be deductible.

    I hope this helps!

    --
    M. Blake Perdue, Esq.
    *Managing Partner*
    Perdue Law Group LLC
    20 Community Place
    Morristown, NJ 07960

    tel. 973.946.8787
    fax. 973.695.4565

    web: perduelawgroup.com




  • 5.  RE: Are divorce legal expenses tax deductible?

    Posted 03-24-2015 03:47 PM
    That is my understanding as well!

    Sent from my iPhone




  • 6.  RE: Are divorce legal expenses tax deductible?

    Posted 03-24-2015 03:49 PM
    I respectfully disagree regarding the tax deductibility of a lawyer's equitable distribution work. Legal work regarding the protection of certain classes of assets can be tax deductible, regarding, for example, the clearing of title or the protection of income producing assets.



    I am sure one of our erstwhile tax brainiacs will weigh in on this topic with specifics.



    Hanan




  • 7.  RE: Are divorce legal expenses tax deductible?

    Posted 03-24-2015 04:04 PM
    From the publication:

    "You cannot deduct the costs of personal advice, counseling, or legal
    action in a divorce. These costs are not deductible, even if they are paid,
    in part, to arrive at a financial settlement or to protect income-producing
    property.

    However, you can add certain legal fees you pay specifically for a property
    settlement to the basis of the property you receive. For example, you can
    add the cost of preparing and filing a deed to put title to your house in
    your name alone to the basis of the house."


    I am by no means a tax expert, but it seems that the language of the
    publication specifically states legal fees connected to a property
    settlement are not deductible, but are able to be added to the basis of
    property. By my understanding (not at all an expert), this is not a
    "deduction" but rather will affect any realized gain or loss once the
    property is sold.


    --
    M. Blake Perdue, Esq.
    *Managing Partner*
    Perdue Law Group LLC
    20 Community Place
    Morristown, NJ 07960

    tel. 973.946.8787
    fax. 973.695.4565

    web: perduelawgroup.com