Prior to 2018, legal fees could be deducted as a miscellaneous expense subject to a 2% adjusted gross income limitation. The Tax Cuts and Jobs Act of 2017 eliminated miscellaneous itemized deductions as part of individual tax reform.
For tax years 2018 through 2025, miscellaneous itemized expenses subject to the 2% adjusted gross income limitations are not allowed. Therefore, most legal fees and court costs cannot be deducted. These costs cannot be netted against income from a legal settlement.
Fees that you pay to professionals, such as attorneys and accountants, are deductible when they relate to your ongoing business.
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