Can You Deduct Criminal Defense Legal Fees?

More often than not, the unexpected can happen. For example, if you are like me, you did not expect to be paying for an attorney’s fees when you made your plans five years ago. Unexpected costs can take a negative toll on your personal finances as well as your lifestyle. Whether a family emergency or unexpected legal matters arise, there is no denying that unexpected expenses can hurt one’s financial health. After all, who among us is financially able to spend money on legal fees?

However, there are several benefits of knowing whether or not your legal fees are tax-deductible. In doing so, you may make better financial choices when faced with large amounts of legal fees. Knowing when legal fees are tax-deductible will allow you to better budget for these new expenses without sacrificing your current lifestyle. With that said, this article explores whether or not your legal fees are tax-deductible according to federal law. In addition to the information on tax deductions, this article will offer helpful tips on managing your personal finances if faced with legal proceedings. The goal is to help you “Live Richly on a Budget.”

Can you deduct criminal defense legal fees?

Under federal law, criminal defense legal fees are an exceptional matter. Legal fees paid during criminal proceedings for the defense of a criminally accused individual are tax-deductible. However, legal fees paid for civil or business proceedings are not tax-deductible. Even though legal fees are not deductible under federal law, some states may allow deductions of legal fees in specific settlements. Be sure to consult the law in your state for more on legal fees and deductions.

Accordingly, if you plan on hiring an attorney for legal fees associated with a criminal case, be sure to budget to include these costs if you qualify under federal law. The amount you can deduct on a criminal defense case is subject to limitation according to your net income. Limitations on the amount you can deduct from federal taxes may prevent you from claiming the entire amount of your legal fees on your tax return. However, it is possible to carry forward the excess amount of legal fees to the next year instead of losing the deduction altogether.

When faced with legal fees, sometimes the total amount may be too high to afford. In other words, hiring the cheapest attorney does not always translate into the best experience. Once you find an attorney you like, be sure to follow up prior to agreeing on legal representation. In addition, it is good practice to obtain a written agreement of fees before enrolling in legal services. Be sure to get everything regarding costs in writing – including hourly rates, administrative fees, etc. The written practice will help avoid expensive mistakes in the future.

In conclusion, not all legal fees are tax-deductible. However, if you are faced with paying legal fees associated with a criminal proceeding, be sure to check on your tax return for whether legal fees for criminal defense are tax deductible. In doing so, you may easily reduce the negative financial impact of having to pay for an attorney.