@K9JN wrote:
For 2023 tax year, Pub 529 States " Legal expenses that you incur in attempting to produce or collect taxable income ....... are miscellaneous deductions..... I read this to mean that a portion of the SSDI legal fee can be claimed as a misc deduction if a portion of the SSDI income is taxable. e.g. Assume 45% of the SSDI is taxable, then in this example, the dollar amount of 45% of the SSDI legal fee that exceeds 2% AGI can be claimed, assuming no other misc deductions to simplify this example . Do I understand this correctly?
I don't know where you are seeing that, the current version of pub 529 on the IRS web site is dated December 2020 and does not contain that language.
https://www.irs.gov/pub/irs-pdf/p529.pdf
The principle in general is correct for tax years prior to 2018. Legal fees connected with producing income are deductible. If 45% of your SS income is taxable, then 45% of your legal fees would be eligible to be included as 2% miscellaneous deductions. But that entire class of deduction is not allowed for 2018-2025.
You can enter those expenses because they may be deductible in some states, but you have to take into account state rules for taxability of social security. For example, in New York State, SS benefits are never taxable, so even though NY still allows the general class of 2% deductions, the specific legal expenses for winning your SS case are not deductible in NY.
