Are legal fees for estate planning tax deductible?

The simple answer is no, most estate planning services are not tax deductible. However, there is a bit more to it than that. Legal fees for estate planning can only be deducted if they are related to income-generating assets.

This means that if you are paying a lawyer to help you set up a trust or draw up a will, those fees cannot be deducted from your taxes. However, if you are paying a lawyer to help you with an asset that will generate income, such as an investment property, then those fees may be deductible.

Ultimately, it is important to speak with a tax professional to determine whether or not your particular legal fees are tax deductible.

The IRS’s thoughts on deducting estate planning fees

The IRS Publication 529 states that "You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040). These expenses must be both ordinary and necessary in carrying on your trade or business or in the production of income."

Therefore, according to the IRS, only legal fees related to income-generating assets can be deducted as miscellaneous itemized deductions. This means that if you are paying a lawyer to help you set up a trust or draw up a will, those fees cannot be deducted from your taxes.

What are the estate planning fees that are considered miscellaneous deductions?

The IRS lists the following examples of expenses that can be considered miscellaneous deductions:

• accounting fees
• investment advisory fees
• tax preparation fees
• legal fees related to income-generating assets

Therefore, as you can see, only legal fees related to income-generating assets can be considered miscellaneous deductions. This means that if you are paying a lawyer to help you set up a trust or draw up a will, those fees cannot be deducted from your taxes.

The following are examples of expenses that are not deductible:

• legal fees for personal matters
• legal fees for buying or selling a personal residence
• legal fees for preparing wills and trusts

Therefore, as you can see, any legal fees that are not related to income-generating assets are not deductible. This means that if you are paying a lawyer to help you set up a trust or draw up a will, those fees cannot be deducted from your taxes.

How to claim tax deductible fees on your income

If you have paid any fees that are considered miscellaneous deductions, you can claim them on your taxes by itemizing them on Schedule A (Form 1040). To do this, you will need to list the expenses as "Other Miscellaneous Deductions" and the total amount of all such deductions must be more than 2% of your adjusted gross income.

For example, if your adjusted gross income is $50,000, you would need to have more than $1,000 in miscellaneous deductions before you could claim them on your taxes.

Speak with an estate planning professional

Estate planning fees are not tax deductible in most cases, but you’ll need to speak with an accountant or estate planner to find out if they are for you. If you need help getting started on your estate plan, our team is here to assist you.

We offer free consultations to help get you started on the right path. Give us a call today and let us help make sure your loved ones are taken care of after you’re gone.