If I paid a lawyer to file a claim with my disability insurance but the disability claim was awarded without having to go to court, can I deduct the lawyer's fees?

[4keysfam]

I hired the lawyer to make sure my claim was approved. Fees were pay as you go and not on contingency. The claim was approve and I have been receiving benefits. The claim was approved in 2015 but is being reviewed at the 2 year mark and I am having legal fees associated with that. Can these fees be listed in misc.?

[RichardG]

You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax.

You can deduct legal expenses that are:

• Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business,
• For tax advice related to a divorce if the bill specifies how much is for tax advice and it is determined in a reasonable way, or
• To collect taxable alimony.

If the attorney fees are not for one of the purposes (divorce, for example), the legal fees are not deductible.

In your case, it appears the question turns on whether the dispute could lead to the collection of taxable income.  If the disability award is taxable income to you, then the legal fees are deductible.  It's not relevant whether the dispute ended up in court.

[4keysfam]

I did result in a monthly disability award that is taxable income to me. That began in 2015. The lawyer fees for 2016 have been in responding to the insurance company in review of whether or not they will continue to pay benefits after the two year mark (disability definitions change) and attending their independent medical exams & legal fees incorporated with videographers at these exams. If I am reading things correctly, I should still be able to deduct these fees charged by my lawyer for 2016 as they are associated with keeping my disability (taxable income) benefits. Am I reading this correctly?

[RichardG]

Yes.  The legal fees are deductible.  Report the fees under Federal Taxes>Deductions & Credits>Other Deductions and Credits>Legal Fees