Legal Deductions

• Investment legal fees such as fees paid to an attorney for rental real estate legal advice are deductible. Additionally, legal fees expended to produce income are deductible. For instance, a sole proprietor who seeks legal advice to start his business may deduct those legal fees. Tax advice for resolving business loss issues care deductible.
  
  

Business and Non-Business Legal Fees

• Legal fees for tax advice and tax preparation are deductible on Schedule A of IRS Form 1040. Business legal advice includes professional legal advice related to conducting business, maintaining employment or keeping the taxpayer's business running. For instance, intellectual property infringement claims against a taxpayer's business for alleged trademark infringement may require a patent and trademark lawyer's professional advice. In order to maintain the taxpayer's business operations from completely shutting down, the taxpayer incurs legal expenses. Those legal fees are deductible.
  
  

Collecting Alimony and Tax Advice

• Because the IRS taxes alimony to the recipient, taxpayers who pursue divorce alimony settlements can take a tax deduction for a divorce attorney's legal advice. Additionally, divorcing taxpayers seeking advice for tax implications related to the divorce or property settlement agreement can deduct the portion of fees related to the tax advice and alimony advice. The taxpayer must be able to provide an attorney's bill providing specific breakdowns of time spent on those issues. Taxpayers should probably request this type of specific breakdown from their attorneys in advance of expenditure or prior to signing a retainer agreement.
  
  

Unlawful Discrimination Suits

• Unlawful discrimination claims are deductible. However, taxpayers may only deduct the costs of pursuing unlawful discrimination claims if the taxpayer won a judgment or settlement for that claim and is including it as income. Thus, the IRS allows deductions only if the amount is reported as income.
  
  

Tax Advice

• Because tax laws frequently change, don't use the information in this article as a substitute for legal or tax advice. Seek advice through a certified accountant or tax attorney licensed to practice law in your jurisdiction.