Attorneys’ fees in a divorce can be enormous expenses for both parties involved, but of course they are sometimes necessary to get the fair result one is seeking, whether related to property issues, spousal support, or child custody and/or child support. Attorneys’ fees certainly eat into your personal “profits” for the year and act as a cost of “doing business” in your personal life, whether they are expended for financial or relational reasons, which raises the question of whether such fees are deductible on your taxes. After all, a business that has to expend company fees on a lawsuit would likely be able to deduct those expenses when calculating its profit, so shouldn’t a person dealing with a divorce lawsuit be able to do the same?
The answer under current tax law is generally going to be no (although it should be noted that, nothing in this blog is intended to be legal advice to you, and, furthermore, tax law is a whole separate area of law from family law, and anyone with tax questions related to their divorce should consult with a tax professional). Under prior tax law, there were limited scenarios in which a litigant in a divorce could potentially deduct at least a portion of their attorneys’ fees related to the divorce, but the provisions allowing for such a deduction have been at least temporarily phased out.
Previously, pursuant to Internal Revenue Code section 212, taxpayers could deduct “all the ordinary and necessary expenses paid or incurred during the taxable year” for, among other things, “the production or collection of income” and “for the management, conservation, or maintenance of property held for the production of income.” Such deductions were considered “miscellaneous itemized deductions” and needed to be greater than 2% of a taxpayer’s income, and were phased out for taxpayers earning income over certain levels. Based on this law, some taxpayers did take tax deductions for attorneys’ fees related to obtaining spousal support or alimony based on the principle that paying attorneys to win a spousal support award was an expense paid for the collection of income in the form of spousal support.
However, the Tax Cuts and Jobs Act (TCJA) signed into law by President Trump in December 2017 eliminated the ability to deduct miscellaneous itemized expenses pursuant to Internal Revenue Code section 212 through at least 2025. Therefore, a taxpayer cannot presently deduct attorneys’ fees incurred or paid in connection with spousal support. Notably, the TCJA also changed the law relating to taxability of spousal support, and spousal support awards made on or after January 1, 2019 are no longer taxable to the receiver of support or tax deductible to the payer.
While incurring attorneys fees to win a fair spousal support award are certainly a concern (certainly, most people seeking spousal support do not have a lot of extra funds at their disposal to pay attorneys), it is important to understand that California has laws which allow a party in a family law matter to seek an attorneys’ fees award from the other party where there is a disparity in access to funds to pay attorneys, e.g. when one spouse earns a higher income than the other spouse. It should be also kept in mind that there can be more efficient ways of obtaining a spousal support award than paying attorneys to litigate the matter in court, such as entering into mediation with the other party to reach an agreement on spousal support.
Guidance on Your California Family Law Questions From a Westlake Village Family Law Attorney
If you would like to learn more about how our office can provide guidance on any California family law issues you are facing in Ventura County or Los Angeles County, contact the Zonder Family Law Group office today at (805) 777-7740 or (818) 877-0001, or schedule your strategy session using easy-to-use online form here.