Can I deduct legal fees i paid in 2017 when I left my employer in 2016? The fees relate to phantom stock payments which were to commence after I left the firm.

[DS30 · Accepted solution]

It depends but if you are hiring an attorney to collect on income that will be reported as taxable income at some future date, then you will able to claim these legal expenses.

The basic rule is that you can deduct attorney's fees you pay to:

• produce or collect taxable income, or
• help determine, collect, or obtain a refund of any tax.

Simply put, you can take a deduction if you need an attorney's help to make money you’ll have to pay tax on; or if an attorney helps you with a tax matter, like representing you in an IRS audit.

[Anonymous]

Thank you for your prompt response!  The phantom stock payments I am hiring an attorney for would generate taxable income....in the form of payment for my share of the company's stock.  would that change your response?

[DS30]

Yes - if you are needing an attorney to collect on income that would be taxable income at some future date, then the legal expenses are deductible - I have edited my answer to reflect this.

[Anonymous]

ty!!