Did you know that some of your legal fees in connection with your divorce may be tax deductible? Generally, legal fees in connection with a divorce are not tax deductible. But there are a couple exceptions:
1. Legal fees related to tax advice in connection with a divorce; and
2. Legal fees associated with obtaining alimony (termed “spousal maintenance” in Kansas but “alimony” by the IRS) are deductible.
Legal Fees Related to Tax Advice
During settlement negotiations, a prudent attorney will provide the client with some advice regarding the tax implications of property division, sale of a marital home, claiming children as dependents, and more. Often times, these issues are contested and negotiated by attorneys. If the fees are related to tax advice, then the fees are deductible!
Legal Fees Related to Alimony
Why does the IRS allow these legal fees to be deducted? Alimony must be claimed as income for tax purposes. Apparently the IRS thought it fair to allow the fees for obtaining that income to be deducted. So, if you received temporary or permanent alimony payments in 2015, the legal fees associated with obtaining the alimony award may be deductible.
More questions? We recommend reading this IRS pamphlet, as it does a decent job of simplifying otherwise complex and confusing tax rules.
The experienced family law attorneys at Joseph, Hollander & Craft LLC work hard to spot and address potential tax implications relating to clients’ divorce settlements. This is important because the biggest taxable events often do not occur during the divorce itself, but in the years to follow. We always recommend that clients work with both an attorney and a tax professional for guidance specific to their situation.
For help with your divorce, contact Joseph, Hollander & Craft LLC today.