When Are Estate Planning Legal Fees Deductible?

Depending on the situation, about 40 to 60 percent of legal fees for estate planning are tax-deductible. Regardless of the amount, it is important to know that there are some exceptions to this rule. Under the IRS’s 2% rule, miscellaneous deductions are not deductible. If you meet this requirement, you will be allowed a deduction for the rest of your legal fees. Here are some specific circumstances where legal fees for estate planning may be deductible.

Expenses for Management, Conservation, or Maintenance of Property

If you are looking to deduct some of your estate planning fees, keep in mind that the IRS only permits these expenses when the fees relate directly to the conservation, management, or maintenance of property. As such, it is important to allocate your estate planning expenses between deductible and nondeductible categories. Itemization of expenses can prevent tax disputes and make it easier to document the services you receive.

Estate planning fees were previously deductible as miscellaneous expenses, but the new tax laws made them non-deductible. More about Houston here. You can deduct them if they exceed 2% of your adjusted gross income, but they will no longer qualify as miscellaneous deductions. In general, you can deduct the fees only if they exceed 2% of your adjusted gross income (AGI).

You can deduct the cost of estate planning fees as an itemized deduction on your income tax return. Most estate planning fees fall under the category of miscellaneous deductions. Legal fees for the creation and management of a trust can also be deducted. Legal fees related to the collection and filing of estate taxes are also deductible. These expenses are not personal, but they are associated with income-producing property.

Expenses for production or collection of income

Most estate planning fees are deductible on your federal income tax return as a miscellaneous itemized deduction. These expenses are deductible under section 212 of the Internal Revenue Code. Expenses that relate to property held for income are deductible only if they are directly related to the taxpayer-client’s tax liability. The IRS defines these expenses as costs for the production or collection of income.

However, estate planning fees are no longer deductible as itemized deductions, due to the new tax law. However, you can still deduct miscellaneous expenses if they exceed 2% of your adjusted gross income. The IRS has set a 2% floor on these expenses, so make sure to keep these records for tax purposes. Expenses for production or collection of income are not deductible as estate planning fees, but they are deductible as other miscellaneous expenses.

Tax-deductible expenses for estate planning may include the following types of services: guidance on the purchase of income-producing instruments, tax-efficient transfer methods, and ways to avoid federal taxes. This article. Other types of fees for estate planning may also be deductible, including account custodial fees, investment advice for trusts, and trust tax preparation. The type of services a tax attorney performs for you may determine whether these expenses are deductible.