Can I deduct attorney fees in this matter?

[GodChoseMe]

I am soon to receive proceeds from the recent sale of a family-owned home due to a bankruptcy filing by one of my siblings. I attempted to challenge the sale of the home with an attorney but ultimately decided to let it go to the trustee in my sibling’s bankruptcy to sell it.

My question: are the fees I paid for the attorney to defend me in the bankruptcy case tax deductible? I am going to pay the attorney out of the proceeds but wonder if they can be deducted. Also, if they can be deducted, what documentation will I need beside a final bill from the attorney to support the deduction if allowed? Is this something that will be easy to fill in within the TT software (I usually use Premier).

I am a resident of Georgia but the home is located in New York State (New York City to be more precise) if that makes a difference.

Thanks. 

[xmasbaby0 · Accepted solution]

https://turbotax.intuit.com/tax-tips/tax-deductions-and-credits/can-i-deduct-legal-fees-on-my-taxes/...

[GodChoseMe]

Thanks for that link. The article explained the attorney fees in my case are not deductible. I appreciate you for posting it. Have a great day.

[Opus 17]

Generally, no.

Personal legal fees used to be deductible if they were connected with preparing taxes, or making or protecting taxable income.  That was a miscellaneous itemized deduction subject to the 2% rule, and that type of deduction was eliminated for 2018-2025 by the 2017 tax reform law.  You can still enter this type of deduction in turbotax, because some states still allow this itemized deduction on their state returns.  The actual benefit may be very small or zero, because of the limitations on 2% itemized deductions.

However, since the proceeds from the sale are probably not taxable income to you, these legal fees would not have been deductible even under the old rules.  If you are required to pay income tax on the proceeds, then you can list the legal fees as a miscellaneous itemized deduction, and you might get a benefit on your state income tax return, depending on what state you live in and your other income and deductions.