If you are dealing with a legal issue, you may be wondering if you are able to deduct lawyers fees from your taxable income. In some cases, you can, but unfortunately, there are many types of personal legal fees that are not tax deductible.
Legal fees may be deductible in the following instances, regardless of whether you pursued a case and won.
As a general rule, lawyers fees related to personal issues, including civil cases, are not tax deductible. Those types of issues include the following:
Many taxpayers were formerly able to claim itemized deductions for various types of personal legal fees. However, the 2017 Tax Cuts and Jobs Act (TCJA) changed many tax laws, including eliminating itemized deductions for 2018 through 2025. As a result, taxpayers no longer have the leeway they used to.
If you successfully pursue a personal injury case and receive a settlement or award, the amount of compensation you recover before legal fees typically must be included as your gross income when filing taxes. In other words, attorneys fees are not deductible, and although they will typically take a percentage of your settlement as their contingency fee, for tax purposes, you will be treated as having received 100% of the settlement. However, there are unique tax laws related to personal injury awards, and there may be portions that are not taxable.
No matter what situation you are in, it is always best to consult your attorney if you are concerned about whether their fees will be tax deductible in your case. You also have the right to ask that your attorney prepare a billing statement that details which fees are deductible and which are not.