Are trademark legal fees tax deductible [Fact-Checked]

Last updated : Aug 18, 2022

Are legal fees tax deductible?

Legal fees that are deductible In general, legal fees that are related to your business, including rental properties, can be deductions. This is true even if you didn't win the legal case in which the legal fees were incurred.

Are legal fees tax deductible ATO?

Generally, you can claim a tax deduction for legal fees if they have been: incurred in gaining or producing your assessable income; or. necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income.

What kind of legal expenses are tax deductible?

Legal fees for tax advice are deductible, and any tax qualifies: income, estate, gift, property, excise or sales and use tax. The fees may involve tax planning or controversies, and even fees for purely personal tax advice qualify (as miscellaneous itemized deductions).

What business legal fees are deductible?

The general wisdom is that business legal fees are tax deductible. So long as the fee is both “ordinary and necessary” in the course of business, you can deduct it. By contrast, personal legal fees are not tax deductible. The exception is legal fees incurred by an individual in the course of trade.

What kind of legal fees are not tax deductible?

Fines, penalties and their related legal costs are not allowable as it is considered that breaking the law is not part of the normal trading activities of a company. Costs relating to personal legal issues or private disputes are also not allowable as these are not considered to be a company expense.

Are legal fees amortized?

Legal fees for attorney work on a business startup must be deducted over 15 years, through a process called amortization. Legal fees for personal matters are not deductible as a business expense.

Can legal fees be capitalized?

However, the IRS recently finalized regulations that are effective for 2014 that clarify that legal fees must at times be capitalized as an asset for tax purposes, and thus may not be immediately deducted.

What type of expense is legal fees?

The legal fees Ira pays Jake are a deductible business expense. Legal and professional fees that you pay for personal purposes generally are not deductible. For example, you can't deduct the legal fees you incur if you get divorced or you sue someone for a traffic accident injury.

What is included in legal and professional fees?

Legal Fee Tax Deductions. Business owners can deduct legal and professional fees to the extent they are an ordinary part of and necessary to operations. Legal and professional services is a broad category that generally includes expenses for your lawyer, accountant and any other professional consultants you may hire.

Are legal fees on sale of business allowable?

Are the legal fees capital in nature? Legal and professional fees that are incurred in respect of a capital item are not allowable, such as those associated with incorporation, acquisitions, disposals, the improvement or destruction of assets.

What deductions can I claim without receipts?

If you don't have original receipts, other acceptable records may include canceled checks, credit or debit card statements, written records you create, calendar notations, and photographs. The first step to take is to go back through your bank statements and find the purchase of the item you're trying to deduct.

Can you expense legal fees?

The tax code was amended back in 2004 to allow legal fee deductions “above the line” in some cases, which is almost like not having the income in the first place. But the deduction has been quirky to claim ever since. Many taxpayers have trouble; so do accountants and some types of tax return preparation software.

What business expenses are not deductible for tax purposes?

Anything to do with personal activities or personal spending is a non-deductible expense. As are any political contributions, commuting costs and any gifts over $25. It might seem like an expense is business-related, but sometimes they're not.

What are legal fees accounting?

More Definitions of Legal Fees Legal Fees means the fees and disbursements of legal counsel, legal assistants, experts, accountants, consultants and investigators, before and at trial, in appellate or bankruptcy proceedings and otherwise.

What start up costs are tax deductible for a business?

The IRS allows you to deduct $5,000 in business startup costs and $5,000 in organizational costs, but only if your total startup costs are $50,000 or less. If your startup costs in either area exceed $50,000, the amount of your allowable deduction will be reduced by the overage.

Which cost may not be capitalized?

Expenses that must be taken in the current period (they cannot be capitalized) include Items like utilities, insurance, office supplies, and any item under a certain capitalization threshold. These are considered expenses because they are directly related to a particular accounting period.

Are reimbursed legal fees taxable income?

In a unanimous decision, the U. S. Supreme Court has ruled that attorneys fees paid out of a judgment or settlement under a contingent fee agreement are includible in a claimant's gross income for federal tax purposes.

What is considered professional fees in accounting?

What Are Professional Fees. Professional fees refer to the fees charged by a person considered to be a “professional” such as a lawyer, accountant, doctor, engineer, financial planner, appraiser, management consultant, or other.

Where do I deduct professional fees?

Line 8860 – Professional fees (includes legal and accounting fees) Deduct the fees you incurred for external professional advice or services, including consulting fees. You can deduct accounting and legal fees you incur to get advice and help with keeping your records.

What itemized deductions are allowed in 2021?

• Medical and Dental Expenses.
• State and Local Taxes.
• Home Mortgage Interest.
• Charitable Donations.
• Casualty and Theft Losses.
• Job Expenses and Miscellaneous Deductions subject to 2% floor.
• There are no Pease limitations in 2021.

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welcome to hump is tax talk my name is lissandra Everett I am the home biz tax lady where I help home business owners win the tax game home biz tax talk airs Monday through Friday 9:00 o'clock ish and when you tune into my show you're gonna hear about topics that are important to the home business community alright let's talk about these legal fees y'all so you know over the it has been a busy legal year so far right we got a lot of stuff going on in the legal front you got Robert Kraft getting pinched down in Florida you got the Jesse small that case you got our Kelly getting arrested you got Paul Paul Manafort and his stuff going on you got Michael Cohen and his stuff going on there's a lot of legal stuff that is going on that's just in the news right and so like and so if it's in the news there are some high-powered attorneys that are involved in this stuff and can you imagine how much these folks is getting paid okay so then that leads one to ask well then um tax deductible and the answer is a definite maybe not let's talk about it all right so if your legal fees are based on a business type of defense so let's say someone happens to sue you for something if it's something business-related then those legal fees can be deducted okay but there was a suspension of the tax deduction if your case was you know centered around sexual harassment and discrimination so think about that before you you know you go lose your mind alright but otherwise but what we're talking about personal legal fees the tax cuts and Jobs Act took that provision out mm-hmm so before January 1st 2018 your legal fees for the most part there were some exceptions y'all we got time to go into that and I am NOT an attorney okay there's all kinds of exceptions to the rules but but prior to 2017 you could deduct legal fees that was subject to the 2 percent floor meaning tax legal fees that exceed 2% of your adjusted gross income or tax deductible that provision has been taken out so where you've got like your all these folks if this all of this stuff is personal legal fees no it is not a tax deduction anymore so who they gonna be writing some fat checks for these folks and you don't get to deduct a dime now there is the question about you know when people get awarded damages right like you get I think the most recent case that I saw was the Monsanto case Monsanto's case where were he was I think he was a groundskeeper that received you know cut multi-million dollar award well you know then still he had to deal with attorneys and so he's going to have to pay those attorneys but he's not going to be able to deduct those legal fees if it was like for punitive damages that's where you'd know punitive damages that is taxable income so if you get this multi-million dollar award for punitive damages you're gonna have to pay taxes on the whole amount okay if any of that goes to your attorneys you're gonna have to pay them they're gonna have to pay taxes on that income right but you are gonna have to pay taxes on the amount that you receive for punitive damages now if you receive damages for like physical injury or illness that is not taxable you still gotta pay do the motor fees but it's not taxable to you but something like punitive damages is taxable to you you still gotta pay attorney fees and they got to pay taxes on that money too so you know so legal fees no it's you know in in general terms not tax-deductible anymore so and let and legal fees rack up quick right because sometimes just a basic legal consult can be five hundred to a thousand dollars hmm now you're talking about hours in bracket hours and hours of attorneys fees weren't you know like the other with that movie um with Tom Cruise back in the day I don't know why I just thought about this movie but it was a great movie with Gene Hackman and they were like adding all of these little these little additional fees you know like billable hours to their to their client bills and stuff that was a great movie you got to go back and watch it but you know those billable hours do start to add up and you know an attorney can be $500 an hour $1,000 an hour and you're talking about these high-profile type people you best believe that that thousand dollars an hour is not anything that's out of the ordinary so you think about all the the millions of dollars of attorneys fees that it can be wrapped up in just in these little few cases alone where know nobody's gonna get the write that off at all that's alright if you can now what an interesting thing I read though is with the Jesse small that case now I was reading I forgot who wrote the article but they were saying that because he originally said that he did this to further his career because he said that that those legal fees actually could be tax-deductible like has a better shot of being tax deductible as a business expense than anything else so I'm gonna be watching that and y'all know when I get the update I'll be let y'all bill right because that's just the T to me I have to know those kind of things but the by-and-large legal fees are no longer tax-deductible and so yeah that's just a bullet that you have to bite when you are talking about you know dealing with lawsuits or having to pay for attorneys for you know for different types of like estate planning you know you don't need only need attorneys for you know dealing with the legal system in a bad way but you need attorneys for you know things like trusts estates you know sometimes you need an ax yes you need an attorney to draft a will so those type of administrative services are no longer tax-deductible either so yeah that was one of those things I was like oh yeah you thought was gone so I kind of knew but now to see the application of it that can be kind of bad okay so yep that's it for today you guys so it's a real quick clip but the legal fees whoo that's the big fat checks but you can't write that off on your taxes no mo hmm all right you guys I gotta run so thank you so much for tuning into home biz tax talk again we air Monday through Friday 9 o'clock dish and you can tune in right here to get your questions answered about your home business taxes if you have not scheduled your 15 minute complimentary consult you can do so at wwm biz tax chat com all right have a great day I'll see you next time bye

Thanks for your comment Merna Hutzel, have a nice day.
- Marcela Clusky, Staff Member

hey what's up everybody this is attorney dan nguyen and today i want to talk about trademarks and whether trademark costs are tax deductible so i don't profess to be a tax attorney or cpa or an enroll agent or a tax professional but i do have being a business owner and having dealt with taxes um on a tangential basis i think i can do my best to answer this question but first you gotta understand what what the irs uses as a standard for what can be tax deductible now generally speaking and this is what i found on the irs website you know it has to be ordinary and necessary okay and so then you get to ask hey what's ordinary and necessary that is common and acceptable in your particular industry in my opinion and i think most most accountants uh tax professionals agree that legal fees and trademark costs are tax deductible okay and so uh it is a furtherance of your business it is something that you are protecting for your business and so i think certainly it is ordinary and necessary for your business and are tax deductible so uh you know if you are a business owner looking to um protect your business name your logo or slogan and uh you know get want to get a tax deduction as a bonus feel free to reach out to us and we can see um you know how we can help you okay this is dan talk to you soon bye

Thanks poka895 your participation is very much appreciated
- Marcela Clusky

About the author

Marcela Clusky

I've studied limnology at University of Illinois at Springfield in Springfield and I am an expert in human development theory. I usually feel aggravated. My previous job was engineering professor I held this position for 6 years, I love talking about climbing and boating. Huge fan of Jeff Bezos I practice volleyball and collect steiff teddy bears.