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Can freelancers deduct legal and professional expenses?

TL;DR

Freelancers can generally deduct legal and professional expenses if they are ordinary and necessary for their business operations, but personal legal expenses are not deductible.

Detailed Answer

Legal and professional expenses are deductible when they are directly related to the operation of a business. This includes fees paid to attorneys, accountants, consultants, and other professionals for services that help maintain or improve the business. For example, costs incurred for drafting contracts, tax preparation, and business-related legal advice are deductible. However, personal legal expenses, such as those related to personal tax advice or divorce proceedings, are not deductible. Additionally, if the legal expense is related to acquiring a business asset, it may need to be capitalized rather than deducted immediately.

Where to Put It on the Tax Form

Schedule C, Line 17

Real World Example

A freelance graphic designer pays $500 to an attorney to draft a contract template for client agreements. This expense is deductible as it is directly related to the operation of their business.

Audit Risk & Documentation Tips

The audit risk for this deduction is moderate. Freelancers should keep detailed records of the services provided, including invoices, contracts, and proof of payment. It's important to ensure that the expenses are clearly business-related and not personal. Retain all documentation for at least three years in case of an audit.

IRS Reference

IRS Publication 535, Business Expenses; IRC §162.

Relevant Industries

FreelancersConsultantsSmall Business OwnersIndependent Contractors

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Disclaimer: This is for informational purposes only and should not be construed as tax or legal advice. Always consult your tax advisor.

Page created on July 15, 2025

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