Whether you can deduct legal expenses on your federal tax return depends on the costs’ “origin and character.” You can generally deduct legal fees related to generating or collecting income, such as for business incorporation or rental property. But you can’t deduct legal expenses for personal matters, such as estate planning or divorce. Recently, the U.S. Tax Court found that a taxpayer wasn’t entitled to deductions he claimed for legal fees incurred in lawsuits against his former attorneys. According to the court, these expenses were for personal legal work. In addition, the man failed to provide sufficient documentation to support the deductions. (J.G. Rosso, TC Memo 2025-115)
