It can be hard to determine which expenses related to the ending of marriage are deductible as legal expenses. Learning which costs to report on your income tax return can avoid reporting errors.
Legal Costs Related to Separation
Legal and court costs related to separation are not deductible by either party involved. If you hire a lawyer to represent you in your separation agreement, you cannot deduct associated fees as an expense on your return.
Legal Costs Related to Divorce
Similarly, neither legal nor court costs related to divorce are considered deductible on your return. This includes the court cost for the proceedings of your divorce which are ineligible for a deduction for both you and your current or former spouse.
Legal Costs Related to Payer of Support Payments
As the payer of support payments, you cannot claim legal fees you incurred for establishing and negotiating a Child or Spousal support amount. Nor can you claim legal fees to establish custody of or visitation arrangements for a child of the marriage.
Deductible Legal Costs Related to the Recipient of Support Payments
Legal fees or court costs relating to support payments are considered deductible to the recipient of Child or Spousal Support payments. These can be from your former or current partner or the natural parent of your child. This includes the set-up of the support payments, attempts to get late support payments paid, or an increase in the support payments payable or paid to you. Specifically, you must be the recipient of the support payments.
To deduct these costs, enter them on Line 22100 – Carrying Charges and Interest Expenses of your tax return. For example, imagine you divorce your wife and pay a lawyer to establish a suitable amount of support payment to receive. In this case, the bill from your lawyer is deductible. Next, another year passes and your wife has missed six of her support payments. You ask your lawyer to draw up the paperwork to receive the late payments. As requested, your wife makes the missing payments. The fee for your lawyer to facilitate this is also deductible. Another five years pass and you petition to increase the support payments to cover the nursing costs of your son after an accident. Similarly, the cost of the legal work surrounding this issue is also deductible.
Legal costs that you received from trying to make child support payments non-taxable can also be deducted. If you receive a court order or agreement that specifies that support payments will not be taxable after May 1, 1997, enter the associated fees on Line 23200 – Other Deductions.
Non-Deductible Legal Costs Related to the Recipient of Support Payments
Legal fees related to collecting a non-qualifying lump-sum payment cannot be deducted. A non-qualifying lump-sum payment is considered a non-support payment. This means it was not a periodic payment and not made under the direction of the original support order. If another court order was drawn up that specified lump-sum payments, this also cannot be deducted.