Costs of Getting a Divorce(p21)

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.

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, see Publication 529, Miscellaneous Deductions.

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.

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.

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 required, 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.

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.

Because you must include alimony you receive in your gross income, you can deduct fees you pay to get or collect alimony.

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.

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 under General Rules, earlier.) 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.