Can I Deduct My Lawyer’s Fees on My Income Taxes? – Our 4 Tips

Did you know that, in some circumstances, you may be able to deduct part of your family law legal fees on your income tax return? Read on for our top 4 things to know on this subject.

1. Fees Spent on Asking for Child or Spousal Support May Be Tax-DeductibleIf you are asking to have child or spousal support paid to you, you may be able to deduct a portion of your legal fees on your income tax return. However, you can’t deduct everything – only the part of your legal fees which was spent on the child and/or spousal support claim. This means that if you are asking for other things at the same time – like a divorce, or having your family property divided – you will need to be able to show what was spent on which issues. The CRA may want a letter from your lawyer stating what percentage of your legal fees was spent on your support claim.However, as further explained below, you need to be asking for “periodic” support (i.e. support paid to you according to a regular schedule, such as monthly payments), and not “lump sum” support.
2. Fees Spent on a Lump Sum Spousal Support Claim Are NOT Tax-DeductibleA “lump sum” payment is a large, one-time payment meant to satisfy the entire support obligation. If you are asking for lump sum spousal support, you will probably not be able to deduct the portion of your fees which were spent on that claim. There are some exceptions to this rule – such as if the lump sum is meant to bring the other person’s historical support obligation up to date, rather than to end their obligation forever.
3. Fees Spent on Defending Against a Child or Spousal Support Claim Are NOT Tax-DeductibleThis means that the person being asked to pay child or spousal support will generally not be able to deduct their legal fees on their income taxes. This is true even if you win your case and don’t end up having to pay any child or spousal support.
4. Fees Spent on Parenting Issues are NOT Tax-DeductibleThis means that the money you spend on things like custody of your children, primary residence of your children, making a parenting schedule, and deciding who will make important decisions about your children’s care and upbringing all cannot be deducted on your income taxes.

Just because your fees might not be deductible if you ask for lump sum spousal support does not mean that you should never pursue it. There are many cases where a lump sum payment might still be the best financial solution even after taking the loss of the tax deductible into account. What’s best for you and your family will depend on your own circumstances, which is why it is important to take a thoughtful approach when pursuing your claim. If you want advice about what method might work best for you, make an appointment with one of our experienced family lawyers today.

Want more information about how child and spousal support payments can affect your income taxes? Take a look at our previous blog post: “How Do Child/Spousal Support Affect My Income Tax? – Top 6 Tips.