Are Business Legal Fees Deductible?

Starting and maintaining your business can be challenging. You need all the help you can get, and sometimes that help needs to be from a professional.

Disclaimer: I am not a CPA. I know a few good ones that specifically help businesses. I am a lawyer, who also happens to do her own taxes (for now) and wants to share some knowledge with my fellow business owners. 

Legal Fees are Tax Deductible For Your Business

When your business is up and running, the fees you pay to your CPA or legal counsel for ordinary and necessary services are tax deductible. (Please see IRS Publication 535 for details. It is written for the average person who is NOT a CPA. Link at the bottom of this article. And note I said, “When your business is up and running…” There is a distinction here from starting up (pre business formation) and after business. Not sure where you fit? Consult a CPA.)

Your personal legal fees are not tax deductible, but those legal fees you incur during the ordinary course of running your business are. This is great news that you can take to your CPA at tax time to make sure you get that tax deduction. Your legal representative should invoice you on a regular basis throughout the year. You can also ask for a yearly summary of services and fees provided from your attorney for tax time. The only exception to this rule is that usually legal fees connected to acquiring business assets are not deductible, they are capitalized. (This is where a CPA comes in handy.) But for the most part, in most cases, those legal fees you pay to an attorney for your business needs are a deductible expense.

For more information about business tax deductions for legal fees, as well as other possible tax deductions for your business, please visit your CPA, or click on the link below. (Hint: Chapter 11 is where you want to go.) If you would like more information on my business legal services, please click HERE.

Please see IRS Publication 535