Checkmark iconCan I Write This Off?

Is legal and professional fees a valid tax write-off?

TL;DR

Legal and professional fees are generally deductible if they are ordinary and necessary expenses directly related to operating your business. However, personal legal fees are not deductible.

Detailed Answer

Legal and professional fees can be deducted if they are incurred in the course of running a business and are considered ordinary (common and accepted in your trade) and necessary (helpful and appropriate for your business). Examples include fees paid to accountants, attorneys, or consultants for business advice or services. However, fees related to personal matters, such as divorce or personal tax advice, are not deductible. Additionally, legal fees related to acquiring business assets must be capitalized and depreciated over time rather than deducted immediately.

Where to Put It on the Tax Form

Schedule C, Line 17 for sole proprietors. For partnerships, use Form 1065, and for corporations, use Form 1120.

Real World Example

A freelance graphic designer hires an attorney to draft a client contract and pays $500 for the service. This fee is deductible as it is directly related to the business operations. The designer would report this expense on Schedule C, Line 17.

Audit Risk & Documentation Tips

Audit risk is moderate. Keep detailed records such as invoices, contracts, and proof of payment to substantiate the business purpose of the fees. Ensure that the nature of the services is clearly documented as business-related.

IRS Reference

IRS Publication 535, Business Expenses; IRC §162.

Relevant Industries

FreelancersConsultantsSmall Business OwnersReal Estate AgentsContractors

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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 25, 2025

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