What is included in deductible legal services?

[DDollar · Accepted solution]

Taxpayers can still deduct legal fees that are attributable to a trade or business carried on by the taxpayer, if such trade or business does not consist of the performance of services by the taxpayer as an employee.

Also, a taxpayer can deduct costs involving discrimination suits and attorney’s fees relating to whistleblower awards and unlawful discrimination. Unlawful discrimination is defined to include: “any provision of Federal, State, or local law, or common law claims permitted under Federal, State, or local law… regulating any aspect of the employee, the employment relationship, including claims for wages, compensation, or benefits, or prohibiting the discharge of an employee, the discrimination against an employee, or any other form of retaliation or reprisal against an employee for asserting rights or taking other actions permitted by law.”

However, a plaintiff’s above the line deductions for fees in employment and qualifying whistleblower cases cannot exceed the income the plaintiff receives from the litigation in the same tax year.