With tax time rapidly approaching, Colorado residents may be wondering whether any of their legal expenses from their divorces are eligible for deduction. The fact remains that the Internal Revenue Service is relatively stingy with tax breaks related to property division. However, some Colorado couples may be able to deduct legal fees needed to collect alimony that is taxable to one spouse. A qualified tax or family law attorney can help Colorado couples learn about their specific situation, but here are some general guidelines about your divorce at tax time.
In general, legal fees and additional costs related to divorce or legal separation are not deductible. However, it is possible that you can deduct the cost of tax-related services when you receive advice about your divorce or separation. Ineligible deductions include those related to counseling and personal advice. Further, the person who is resisting alimony payments may not deduct the legal costs associated with those efforts.
Spouses cannot deduct the cost of income that will not be taxable to that individual. For example, if a spouse will be receiving back child support or spousal support and is not taxed for it, he or she will not be able to deduct the amount. Spouses also cannot deduct any amount paid for their ex’s legal fees, even if that individual only receives tax advice.
With this in mind, if your family law attorney offers tax counseling, as well, make sure that you ask your lawyer to provide a breakdown of deductible and nondeductible amounts. That way, you can provide evidence to the IRS for your tax deduction claims in the event that you are audited.
Source: Huffington Post, “What’s Deductible for Legal Fees When Couples Divorce” Julian Block, Feb. 03, 2014
