Yes, legal fees are deductible as a Miscellaneous Itemized Deduction, and is subject to the 2% rule. In order to claim a deduction for legal fees you must itemize your deductions. Additionally,
the deduction is allowed only for the amount that is more than 2% of your
Adjusted Gross Income (AGI).
Example: If your AGI
is $80,000, your expenses would have to be more than $1,600 ($80,000 x 2%). Even
then, you could only deduct the amount over $1,600. So, if your miscellaneous deductions were $2,000 you could only deduct $400 ($2,000 - $1,600).