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Can I deduct legal and professional expenses?

TL;DR

Legal and professional expenses are generally deductible if they are ordinary and necessary expenses directly related to your trade or business.

Detailed Answer

Legal and professional fees are deductible if they are incurred in the course of operating your business. This includes fees paid to attorneys, accountants, and consultants for services that are directly related to your business operations. However, personal legal expenses, such as fees for personal tax advice or legal fees related to personal matters, are not deductible. For example, fees related to defending a business in a lawsuit or for drafting contracts are deductible, whereas fees for personal divorce proceedings are not.

Where to Put It on the Tax Form

Schedule C (Form 1040), Line 17 for sole proprietors; Schedule E for rental properties; or as a business expense on the relevant business tax return.

Real World Example

A freelance graphic designer hires an accountant to prepare her business tax return and a lawyer to draft a client contract. The fees paid to both professionals are deductible as business expenses.

Audit Risk & Documentation Tips

To minimize audit risk, keep detailed records of the services provided, including invoices and contracts. Ensure that the expenses are clearly related to your business activities and not personal in nature. Maintain documentation that supports the business purpose of the expense.

IRS Reference

IRS Publication 535, Business Expenses

Relevant Industries

FreelancersSmall BusinessConsultantsReal Estate Agents

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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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