Are Attorney Fees Tax Deductible?
Last updated 05/06/2026 by
Ante Mazalin
Edited by
Andrew Latham
Summary:
Attorney fees are not tax-deductible as a personal expense, but they are deductible when directly tied to a business, rental property, or a qualifying legal claim such as an employment discrimination or whistleblower case.
Whether you can deduct them depends on why you hired the attorney, not simply how much you paid.
- Personal legal matters: Attorney fees for divorce, estate planning, or criminal defense are not deductible. The One Big Beautiful Bill Act permanently eliminated the miscellaneous itemized deduction that once covered them.
- Business or self-employment: Legal fees paid in connection with a trade or business are fully deductible as an ordinary business expense on Schedule C, Line 17.
- Rental property: Landlords can deduct attorney fees tied to rental activity on Schedule E, Line 10. Fees paid to acquire a rental property are not immediately deductible and must be added to the property’s cost basis.
- Discrimination claims: Attorney fees from qualifying employment discrimination cases are deductible above-the-line on Schedule 1, Line 24h under IRC Section 62(a)(20).
- Whistleblower awards: Attorney fees from IRS, SEC, and CFTC whistleblower cases are deductible above-the-line on Schedule 1, Line 24i under IRC Section 62(a)(21). False Claims Act attorney fees fall under IRC Section 62(a)(20) and are reported on Schedule 1, Line 24h.
Hiring an attorney is expensive, and the question of whether any of that cost comes back to you at tax time is one most people don’t think to ask. The answer depends entirely on what the legal work was for, not how much it cost or who the attorney was.
Are attorney fees tax deductible? The IRS draws a sharp line here
It depends on the purpose of the legal work. Attorney fees tied to personal matters are not deductible, but fees connected to a business, rental property, or qualifying legal claim are.
Personal legal fees were once deductible as miscellaneous itemized deductions on Schedule A, subject to a 2% AGI floor. The Tax Cuts and Jobs Act suspended that deduction from 2018 through 2025, and the One Big Beautiful Bill Act, signed July 4, 2025, made the elimination permanent. There is no longer a path to deducting personal legal fees on a federal return.
Business-related attorney fees are treated differently. Under IRC Section 162, self-employed filers and business owners can deduct legal fees as an ordinary and necessary business expense. IRS Publication 334 covers this in detail, and the deduction is reported on Schedule C, Line 17 of Form 1040.
Two separate above-the-line deductions exist for certain legal claims. Under IRC Section 62(a)(20), attorney fees from employment discrimination cases are deductible on Schedule 1, Line 24h. Under IRC Section 62(a)(21), attorney fees from whistleblower cases are deductible on Schedule 1, Line 24i. Both reduce your adjusted gross income without requiring you to itemize.
Who can deduct attorney fees?
Eligibility is determined by the nature of the legal work, not the type of attorney or how the invoice is labeled.
- Self-employed filers and business owners: Fully eligible for fees tied to their trade or business. Contract disputes, business formation, employment matters, and compliance work all qualify under IRC Section 162 and IRS Publication 334. Report on Schedule C, Line 17.
- Rental property owners: Eligible for attorney fees directly related to rental activity, such as eviction proceedings, lease drafting, or tenant disputes. Report as rental property expenses on Schedule E, Part I, Line 10. Attorney fees paid to acquire a rental property are not deductible. They are capitalized and added to the property’s cost basis, then recovered through depreciation over time.
- Employment discrimination claimants: Eligible for an above-the-line deduction on Schedule 1 (Form 1040), Line 24h under IRC Section 62(a)(20), limited to the amount of the judgment or settlement included in taxable income for that year.
- Whistleblower claimants: Eligible for an above-the-line deduction on Schedule 1 (Form 1040), Line 24i under IRC Section 62(a)(21). This covers IRS whistleblower awards under Section 7623 and SEC and CFTC whistleblower claims. False Claims Act attorney fees fall under IRC Section 62(a)(20) — the same provision as employment discrimination — and are reported on Line 24h, not Line 24i.
- Personal filers: Not eligible. Attorney fees for divorce, estate planning, or criminal matters are nondeductible personal expenses. Under IRS Publication 529, these were once deductible as miscellaneous itemized deductions, but that deduction has been permanently eliminated.
Taxpayers who pay attorney fees solely for personal matters cannot claim any deduction regardless of the dollar amount involved.
How much of attorney fees can you deduct?
The deductible amount depends on which category applies. Business filers can deduct the full qualifying amount, while discrimination and whistleblower claimants are each capped by the income they reported from that claim.
| Filer type | Deductible amount | Where to report |
|---|---|---|
| Self-employed / business owner | Full amount of qualifying business legal fees | Schedule C, Line 17 (Form 1040) |
| Rental property owner | Full amount tied to rental activity (acquisition fees are capitalized, not deducted) | Schedule E, Part I, Line 10 (Form 1040) |
| Employment discrimination claimant | Up to the amount of settlement or judgment included in income | Schedule 1 (Form 1040), Line 24h |
| Whistleblower claimant | Up to the amount of award included in income | Schedule 1 (Form 1040), Line 24i |
| Personal filer | $0 (not deductible) | N/A |
If an attorney handles both business and personal legal matters, only the business-use portion of the fees is deductible. You must be able to document the allocation between the two.
How to deduct attorney fees
Claiming this deduction requires linking the legal expense directly to a qualifying business, rental, or legal claim activity. Here’s the process for eligible filers.
- Confirm the purpose of the fees. Determine whether the legal work relates to a business activity, rental property, employment discrimination claim, or whistleblower case. Personal legal matters do not qualify, and fees paid to acquire a rental property must be capitalized rather than deducted immediately.
- Request itemized billing. If your attorney handles both personal and business matters, ask for an invoice that separates each type of work. The IRS may request documentation showing how mixed fees were allocated.
- Calculate the deductible amount. For business and rental fees, deduct the full amount tied to qualifying activity. For discrimination or whistleblower cases, deduct only up to the amount of the judgment or award you reported as income on the same return.
- Report on the correct form and line. Business filers enter attorney fees on Schedule C, Line 17. Rental filers report them on Schedule E, Part I, Line 10. Employment discrimination claimants use Schedule 1 (Form 1040), Line 24h. Whistleblower claimants use Schedule 1 (Form 1040), Line 24i.
- Keep records for at least three years. Retain invoices, engagement letters, and documentation linking the legal fees to the qualifying activity. The IRS can audit returns within three years of the filing date under IRC Section 6501.
Common mistakes when deducting attorney fees
The most common error is deducting personal legal fees, such as those paid during a divorce or for estate planning, as a business expense. The IRS distinguishes between the two based on the purpose of the legal work, not how the fees are paid or invoiced.
Missing the above-the-line deduction for discrimination or whistleblower cases is an equally costly mistake, since many qualifying claimants don’t realize the deduction exists or assume it requires itemizing.
- Deducting acquisition-related legal fees immediately: Attorney fees paid when purchasing a rental property are not a current deduction. They are added to the property’s cost basis and recovered through depreciation over the asset’s useful life. Deducting them as a rental expense in year one overstates the deduction.
- Failing to allocate mixed-use fees: If one attorney bill covers both business and personal work, deducting the full amount overstates the deduction. Only the documented business portion qualifies under IRS Publication 334.
- Using the wrong Schedule 1 line for legal claims: Employment discrimination fees belong on Line 24h; whistleblower fees belong on Line 24i. Filing both on Line 24h, or reporting either as an itemized deduction on Schedule A, is incorrect.
Pro tip: If you’re self-employed and your attorney drafted contracts, reviewed vendor agreements, or advised on a business dispute this year, those fees are fully deductible even if the same attorney also helped with something personal. The key is getting a separate invoice or a line-item breakdown for the business work. A single combined invoice with no breakdown makes the deduction harder to defend if the IRS asks.
Attorney fees are one of the more misunderstood deductions precisely because the same expense can be fully deductible for one taxpayer and completely off-limits for another doing what looks like the same thing. The determining factor is always why the attorney was hired and whether that reason connects to income-producing activity.
Key takeaways
- Personal attorney fees are permanently nondeductible. The One Big Beautiful Bill Act eliminated the miscellaneous itemized deduction that once covered them.
- Business owners and self-employed filers can deduct qualifying legal fees in full on Schedule C, Line 17 under IRC Section 162.
- Rental attorney fees go on Schedule E, Part I, Line 10. Fees paid to acquire the property are capitalized, not deducted.
- Employment discrimination and False Claims Act fees go on Schedule 1, Line 24h (IRC Section 62(a)(20)). IRS, SEC, and CFTC whistleblower fees go on Schedule 1, Line 24i (IRC Section 62(a)(21)). These are separate lines.
Frequently asked questions about deducting attorney fees
Are divorce attorney fees tax deductible?
No. Attorney fees paid during a divorce are personal expenses and are permanently nondeductible. They were once deductible as miscellaneous itemized deductions subject to a 2% AGI floor, but the Tax Cuts and Jobs Act suspended that deduction starting in 2018, and the One Big Beautiful Bill Act made the elimination permanent. This applies whether you are the petitioner or the respondent.
Can you deduct attorney fees if you win a lawsuit?
It depends on the type of claim. Business litigation fees are deductible on Schedule C, Line 17 under IRS Publication 334. Employment discrimination fees are deductible on Schedule 1, Line 24h under IRC Section 62(a)(20). Whistleblower case fees are deductible on Schedule 1, Line 24i under IRC Section 62(a)(21). In physical injury cases, the settlement itself is typically excluded from income under IRC Section 104, so there is no income against which to offset a fee deduction.
What records do you need to deduct attorney fees?
Keep itemized invoices or billing statements that identify the specific legal services performed and connect them to the qualifying business or rental activity. For mixed-use billing, retain written documentation of how fees were allocated between personal and business work. Retain all tax-related records for at least three years from the filing date under IRC Section 6501.
Are attorney fees deductible in an employment discrimination case?
Yes. Under IRC Section 62(a)(20), attorney fees paid in connection with an employment discrimination claim are deductible above-the-line on Schedule 1 (Form 1040), Line 24h. Whistleblower case fees are handled separately under IRC Section 62(a)(21) and reported on Line 24i. In both cases, the deduction cannot exceed the amount of the award or settlement you reported as taxable income in the same year.
If you’re uncertain whether your legal fees qualify as a business deduction, a tax professional can review your invoices and determine the correct treatment. SuperMoney’s tax preparation services comparison can help you find a qualified CPA or tax advisor. Business owners looking to identify every available write-off can also review IRS Publication 334, which covers all deductible business expenses including legal and professional fees.
Disclaimer:The information on this page is for general educational purposes only and does not constitute tax, legal, or financial advice. Tax laws are subject to change and vary based on individual circumstances. The content reflects IRS rules as of the date this article was last updated and may not account for recent legislative or regulatory changes. SuperMoney is not a licensed tax advisor, and nothing on this page creates an advisor-client relationship. Consult a licensed CPA or tax professional for guidance specific to your situation.
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