Can I Write This Off?

Is legal and professional fees tax deductible?

TL;DR

Legal and professional fees can be tax deductible if they are ordinary and necessary expenses related to your trade or business.

Detailed Answer

Legal and professional fees are deductible if they are directly related to your business operations. For example, fees paid for legal advice on business matters, tax preparation, or professional services that help you operate your business are deductible. However, personal legal expenses, such as those for personal tax advice or divorce, are not deductible. Additionally, legal fees incurred in the acquisition or disposition of a business asset must be capitalized.

Where to Put It on the Tax Form

Schedule C (Form 1040), Part II, Line 17 for sole proprietors; Schedule E for rental properties; or Form 1120 for corporations.

Real World Example

A freelance graphic designer pays $500 for legal advice on drafting a contract with a new client. This fee is deductible as it is directly related to the operation of their business.

Audit Risk & Documentation Tips

Keep detailed records of the nature of the legal or professional service, invoices, and proof of payment. Ensure that the services are directly related to your business to minimize audit risk. Maintain documentation for at least three years.

IRS Reference

IRS Publication 535, Business Expenses

Relevant Industries

Small BusinessFreelancersConsultantsReal 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 15, 2025

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