topic I have a family trust that invests in private lending. Unfortunately, we’ve had to pay legal expenses to foreclose on some borrowers. Can I deduct legal expenses? in Deductions & credits

I have a family trust that invests in private lending. Unfortunately, we’ve had to pay legal expenses to foreclose on some borrowers. Can I deduct legal expenses?

Kofian — Tue, 03 Feb 2026 16:13:29 GMT

Re: I have a family trust that invests in private lending. Unfortunately, we’ve had to pay legal expenses to foreclose on some borrowers. Can I deduct legal expenses?

Hi Palms — Mon, 10 Mar 2025 23:05:02 GMT

If it's an actual business you can deduct the legal expenses. If it's just an investment, then the legal expenses would be miscellaneous itemized deductions which are no longer deductible after tax reform for the 2018 through 2025 tax years.

Re: I have a family trust that invests in private lending. Unfortunately, we’ve had to pay legal ...

ThomasM125 — Mon, 10 Mar 2025 23:16:37 GMT

If the trust is engaged in business activities with a motive to earn a profit, then the legal fees would be deductible if they are ordinary and necessary for the generation of the income. By business activities, I mean they would have to be more than passive investing. The activity would have to entail effort that was continuous and regular, as opposed to sporadic. You can read more in this article from The Tax Advisor.