Are arbitration fees deductible?

[vivithemage]

We were taken to arbitration for a sale of our house last year. The new owners were claiming we did not disclose something. We ended up winning, but wanted to know if the lawyer expense is deductible?

[bwa · Accepted solution]

I'm assuming that based on the owned 2 out of 5 year exclusion, that this sale was not taxable.

 Legal fees are generally not deductible. There are two significant exceptions

• Legal fees are deductible if incurred to determine or collect any tax liability.
• Legal fees are deductible if the suit is to secure taxable income.

Because of those criteria, your legal fees would not be deductible.