[vc_row][vc_column][vc_column_text]

Suppose you incur legal fees this year relating to your personal investments or a divorce.

Can you deduct the fees on your 2022 return? Definitely not, because of the Tax Cuts and Jobs Act.  Despite the TCJA crackdown, you may still qualify for a personal deduction in certain situations. What’s more, you can continue to deduct legal fees incurred by your business on the tax return for the entity or Schedule C for self-employed individuals.  You could deduct non-business legal fees as miscellaneous expenses for one of these purposes.
• The collection or production of taxable income;
• Management, conservation or maintenance of income-producing property; or
• The determination, collection or refund of any tax.
Miscellaneous expenses were deductible only to the extent the annual total exceeded 2% of your adjusted gross income. If your AGI was $100,000 and you incurred $2,500 in legal fees and $1,000 in other miscellaneous expenses, your deduction was limited to $1,500.  But the TCJA completely eliminates the miscellaneous expense deduction for 2018 through 2025. You can no longer deduct personal legal expenses, regardless of your AGI.  You can still deduct legal fees relating to above-the-line deductions that are NOT treated as miscellaneous expenses. This applies to discrimination lawsuits, such as employment claims for wages, compensation or benefits, as well as attorney’s fees relating to whistleblower awards.  Above-the-line deductions for fees in employment and qualifying whistleblower cases can’t exceed the income the plaintiff receives from the litigation.[/vc_column_text][us_image image=”3812″][/vc_column][/vc_row]