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Can I deduct legal and professional fees?

TL;DR

Legal and professional fees can be deductible if they are directly related to your business or necessary for the production of income.

Detailed Answer

Legal and professional fees are deductible when they are ordinary and necessary expenses directly related to the operation of a business or the production of income. For example, fees paid for tax preparation, legal advice for business contracts, or professional services related to your trade are generally deductible. However, personal legal fees, such as those for divorce or personal injury cases, are not deductible. Additionally, legal fees related to the acquisition or sale of property must be capitalized and are not immediately deductible.

Where to Put It on the Tax Form

Schedule C (Form 1040) for sole proprietors, Line 17 for legal and professional services; Schedule A (Form 1040) for miscellaneous itemized deductions, subject to 2% AGI floor (if applicable).

Real World Example

A freelance graphic designer pays $500 to an attorney for drafting a client contract. This fee is deductible as a business expense on Schedule C.

Audit Risk & Documentation Tips

Keep detailed invoices and contracts from legal and professional services providers. Ensure the expenses are clearly business-related and maintain records that demonstrate the business purpose of the fees. Be wary of claiming personal legal fees as business expenses, as this could trigger an audit.

IRS Reference

IRS Publication 535, Business Expenses; IRS Publication 529, Miscellaneous Deductions

Relevant Industries

FreelancersSmall BusinessConsultantsReal Estate

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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 7, 2025

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