Are Divorce Lawyer Fees Tax Deductible: Divorce law is complicated and involves many different moving parts. The lawyer you choose, the jurisdiction where you must file for divorce, and the complicating factors of your unique situation all lead to the same result, which is a veritable soup of related problems.
As a consequence of these factors, divorce law has many potential questions to answer. Chief among these, especially for the topic of our discussion today, “are divorce lawyer fees tax deductible?” The answer to this question is a relatively straightforward no. But, there is more to be said on this topic.
What Legal Fees Can Be Claimed?
According to the Government of Canada’s (GOC) website, certain legal fees are tax deductible. The most prominent of these fees are the ones related to Canada Revenue Agency expenses. For instance, if you enlisted the help of a lawyer during an audit or appeal, you can claim their fees in the subsequent tax return.
Another example of the legal fees you can claim on your tax return are those surrounding retiring allowances and pension benefits. These payments can be difficult to grasp without sound legal advice and support, but once they are established, claiming the amount paid to the legal professionals is a relatively straightforward process.
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These are the two outliers when it comes to claiming legal fees and neither one of them relates directly to divorce law. However, the final type of fees could not be more intricately linked to the topic at hand. This is, of course, support payments for spouses and children in the wake of a divorce.
The GOC website does not have many details on this form of claimable expense, stating only “certain fees you incurred to try to make child support payments non-taxable” are taxable. However, an accompanying 15-page document can be found on the same page, laying out all the particulars pertaining to these types of support payments.
The document is quite lengthy and includes definitions of support payments and other relevant terms. It also provides resources for those looking to file online, as well as the parameters for many unique circumstances that may arise during the course of the payments. These circumstances include the death of either individual, deductions and what to do when non-residents of Canada are involved.
Still, none of this changes the fact that, where divorce law is concerned, legal fees are not tax deductible. In fairness, the logic for such decisions is easy to decipher, especially when you consider that every divorce necessarily involves two individuals. Well, excluding the recent trend of women marrying themselves, but that is out of the scope for this article.
Who should be able to claim the tax credit in a divorcing couple? Is it both parties, even if one of them didn’t have equivalent income? Should it be the person with a lower income, meaning that the government is preferentially favoured? What about a situation where only one lawyer is used to facilitate the divorce, as is common in mediation and alternative separation? As you can see, the question becomes tricky very quickly and could lead to lots of confusion and wasted time deciding on the right course of action.