Publication 504 |
2001 Tax Year |
Costs of Getting a Divorce
You cannot deduct legal fees and court costs for getting a divorce.
But you may be able to deduct legal fees paid for tax advice in
connection with a divorce and legal fees to get alimony. In addition,
you may be able to deduct fees you pay to appraisers, actuaries, and
accountants for services in determining your correct tax or in helping
to get alimony.
Fees you pay may include charges that are deductible and charges
that are not deductible. You should request a breakdown showing the
amount charged for each service performed.
You can claim deductible fees only if you itemize deductions on
Schedule A (Form 1040). Claim them as miscellaneous itemized
deductions subject to the 2%-of-adjusted-gross-income limit. For more
information, get Publication 529,
Miscellaneous Deductions.
Fees for tax advice.
You can deduct fees for advice on federal, state, and local taxes
of all types, including income, estate, gift, inheritance, and
property taxes.
If a fee is also for other services, you must determine and prove
the expense for tax advice. The following examples show how you can
meet this requirement.
Example 1.
The lawyer handling your divorce consults another law firm, which
handles only tax matters, to get information on how the divorce will
affect your taxes. You can deduct the part of the fee paid over to the
second firm and separately stated on your bill, subject to the 2%
limit.
Example 2.
The lawyer handling your divorce uses the firm's tax department for
tax matters related to your divorce. Your statement from the firm
shows the part of the total fee for tax matters. This is based on the
time used, the difficulty of the tax questions, and the amount of tax
involved. You can deduct this part of your bill, subject to the 2%
limit.
Example 3.
The lawyer handling your divorce also works on the tax matters. The
fee for tax advice and the fee for other services are shown on the
lawyer's statement. They are based on the time spent on each service
and the fees charged locally for similar services. You can deduct the
fee charged for tax advice, subject to the 2% limit.
Fees for getting alimony.
Because you must include alimony you receive in your gross income,
you can deduct fees you pay to get or collect alimony.
Example.
You pay your attorney a fee for handling your divorce and an
additional fee that is for services in getting and collecting alimony.
You can deduct the fee for getting and collecting alimony, subject to
the 2% limit, if it is separately stated on your attorney's bill.
Nondeductible expenses.
You cannot deduct the costs of personal advice, counseling, or
legal action in a divorce. These costs are not deductible, even if
they are paid, in part, to arrive at a financial settlement or to
protect income-producing property.
However, you can add certain legal fees you pay specifically for a
property settlement to the basis of the property you receive. For
example, you can add the cost of preparing and filing a deed to put
title to your house in your name alone to the basis of the house.
You cannot deduct fees you pay for your spouse or former spouse,
unless your payments qualify as alimony. (See Payments to a third
party in the earlier discussion of the general rules for
alimony.) If you have no legal responsibility arising from the divorce
settlement or decree to pay your spouse's legal fees, your payments
are gifts and may be subject to the gift tax.
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