Hello all. I am a physician and I and currently involved in a lawsuit to recoup lost wages at a previous position. Are my legal fees tax-deductible in such a situation? Thanks!
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LEGAL FEES
Thanks I’ve read that but it doesn’t address my specific question.
I'm not sure: I suggest you contact a tax attorney to evaluate the situation.
IRS publication 529, page 4 shows
" Miscellaneous Deductions Subject to the 2% AGI Limit
Unless you qualify for an exception, you generally can't deduct the following expenses, even if you fall into one of the qualified categories of employment listed earlier.
• Legal fees related to producing or collecting taxable income or getting tax advice."
The American Bar Association believes that you can claim a legal fee deduction for recovery of wages.
"Who Can Claim the Above-the-Line Legal Fee Deduction?
The big question, of course, is what types of cases qualify for the above-the-line deduction? The answer is that only employment, civil rights, and some types of whistleblower claims qualify for it. Some people fear that employment cases based on contract disputes without discrimination might somehow not qualify. Perhaps that fear was fueled by the “UDC” notion that might seem to suggest that only unlawful discrimination claims (as opposed to all employment claims) qualify. However, there is a catchall provision, section 62(e)(18), that seems to cover the waterfront and make the long list of claims unnecessary. In the tax code itself, any claim about employment is actually defined as an unlawful discrimination claim."
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