The Tax Cuts and Jobs Act (TCJA), known as tax reform, made it more difficult for you to deduct your legal fees. The new tax reform law suspended (killed is a better word) your legal fees as 2 percent miscellaneous itemized deductions for tax years 2018 through 2025.
This means you need to look for other possible ways to deduct legal fees, such as claiming them as business or rental property expenses. Here are some examples:
New tax reform exception. The TCJA disallowed all business deductions for settlements or payments and the related legal fees for sexual harassment or abuse claims if the settlement or payment is subject to a nondisclosure agreement. If you incur legal fees related to the ownership or protection of your property, then you generally capitalize the legal fees and add them to the tax basis of your property.
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Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances. AuthorKeana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients. |