Debt Settlement Fees

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Are Debt Settlement Fees deductible?

I researched and found this information:

January 27, 2014

Fees Paid for Debt Settlement are Tax Deductible

By: Kevin Fallon McCarthy

Tax season is here.  As we are all looking for ways for get the biggest refund possible here’s one deduction that may help.  Fees paid for debt settlement services are tax deductible starting this year, 2013.  The decision came from a 2012 United States Tax Court Case.

https://www.ustaxcourt.gov/InOpHistoric/TranSummarySwift.SUM.WPD.pdf

In the case, the petitioner wanted to write off fees paid to a debt settlement company whose services resulted in the successful reduction of credit card debt.  The court found that because the debt settlement company’s efforts directly resulted in a $6,753 reduction of debt, their fees of $2,343 qualified as a miscellaneous itemized deduction.

If you are in debt contact a qualified debt settlement attorney.  A qualified debt settlement attorney can successfully negotiate large reductions in the balance of a debt.  In addition, their fees are now tax deductible further helping consumers get out of debt faster.  It’s a win-win situation.

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All deductions in the category "miscellaneous itemized deductions" were eliminated by the TCJA of 2017 for tax years 2018-2025.  Will have to wait and see what Congress does to see if they come back or not in 2026.

These deductions may still be allowed in some states, if those states follow the old federal rules.  You would still list them in the deductions section of the federal interview.  they won't reduce your federal tax, but will flow through to your state tax return if you are in a position to benefit from them.