In general, attorney fees associated with a personal injury lawsuit are tax deductible as a miscellaneous itemized deduction if they meet certain conditions. The Internal Revenue Service (IRS) allows individuals to deduct expenses related to the management, conservation, or maintenance of income-producing property, including personal injury settlements and awards.
However, the deductibility of attorney fees in personal injury cases is subject to specific rules and limitations. Here are some key factors to consider:
Type of compensation: Attorney fees associated with personal injury settlements or awards for physical injuries or physical sickness are generally tax deductible. However, attorney fees related to compensation for non-physical injuries, such as emotional distress, are not tax deductible.
Amount of compensation: In order to claim a deduction for attorney fees, the fees must be related to income that is taxable. If the settlement or award is tax-free, the associated attorney fees are not tax deductible.
Itemized deductions: Attorney fees are only deductible if you itemize your deductions on your tax return. If you take the standard deduction, you cannot deduct your attorney fees.
Limitation on deductions: There is a limit on the amount of miscellaneous itemized deductions you can claim on your tax return. This limit is the amount by which your total miscellaneous deductions exceeds 2% of your adjusted gross income.
It’s important to note that deducting attorney fees in personal injury cases can be complex and may require the guidance of a tax professional. If you are unsure about the deductibility of your attorney fees, it’s recommended that you consult with a tax advisor or attorney.
At Keith D. Leshine Attorney At Law, LLC, located in Duluth, GA, we understand the importance of financial considerations in personal injury cases. Our attorneys are dedicated to helping our clients navigate the legal and financial complexities of their cases and obtain the compensation they deserve. If you have questions about the deductibility of attorney fees in a personal injury case, please feel free to reach out to us for guidance.
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