For the most part, the Internal Revenue Service (IRS) does not allow parties to a divorce to deduct attorney fees, court filing costs and other expenses incurred in pursuit of a divorce, legal separation or order for spousal support. In limited situations, though, a party might be able to deduct costs that are directly traceable to tax advice concerning possible tax consequences of that divorce, separation decree or taxable alimony award.
What Expenses Are Nondeductible?
IRS regulations specifically disallow expenses incurred for the purposes of counseling, personal advice (whether given by an attorney, therapist or other paid expert) and legal actions in a marital dissolution case, request for legal separation or modification of preexisting divorce, separation, support or property division order.
What Expenses May Be Deductible?
Even though the IRS broadly exempts divorce-related legal fees from being deductible, fees specifically related to tax advice and to seek alimony are indeed deductible, though the expenses must be clearly delineated from other, nondeductible legal fees.
Alimony-related legal fees can be deducted to the extent they are used to secure payment of taxable spousal support. There are, of course, specific criteria that must be met before legal fees incurred to seek alimony can be deducted:
- The total fees exceed a full two percent of the payor's adjusted gross income
- The fees must have been incurred while seeking compensation/income that is taxable (like alimony) - not income that is nontaxable like child support
Expenses for research of and advice on tax consequences could be deductible provided that those expenses represent two percent of the payor's adjusted gross income and they are clearly delineated from other divorce, alimony or legal separation-related fees.
Determining the tax consequences of any divorce action is a complicated process. If you need help trying to navigate the muddy waters of tax deductions and exemptions related to these types of legal actions, consult an experienced family law attorney in your area today.