Is Legal Fees Tax Deductible for Your Business?

Yes, legal fees is generally tax deductible for self-employed individuals, freelancers, and small business owners. The IRS allows you to deduct ordinary and necessary business expenses, and legal fees typically qualifies when used for legitimate business purposes.

Key Rules for Deducting Legal Fees

Deductible if related to business operations (contracts, formation, defending business lawsuits). Personal legal issues (divorce, wills) are NOT deductible even if they affect business ownership.

Requirements to Claim This Deduction

• Must be for business matters
• Personal legal issues: NOT deductible
• Keep invoices describing services

How to Document Legal Fees for Tax Purposes

Proper documentation is critical for any business deduction. For legal fees, you should:

• Keep all receipts and invoices showing the amount paid
• Record the date of the expense and the business purpose
• If mixed-use, maintain a log showing business vs. personal usage
• Store records for at least 3 years (7 years for major purchases)

Source: IRS Publication 535; United States v. Gilmore. This information is for educational purposes only. Consult a qualified tax professional for advice specific to your situation.