Are Divorce Attorney Fees Tax Deductible in California?

• Can I deduct divorce attorney fees on my California taxes?
• Are any divorce fees tax deductible in California?
• What about estate planning?
• References

The unfortunate reality of most attorney fees, including those relating to divorce, is that they count as personal expenses and aren’t considered tax deductible on a federal or state level. This is primarily due to changes made by the Tax Cuts and Jobs Act, though state law sometimes varies from federal law. 

In California, the law presently doesn’t allow citizens to deduct attorney fees. Assuming no major political changes, this is likely to remain the case until at least the end of 2025. However, exceptions do exist and are discussed below.

Can I deduct divorce attorney fees from my California taxes?

In the past, many legal fees were considered tax-deductible, reducing the total amount of taxes one had to pay and slightly offsetting their cost. This is typically no longer true on both a state and federal level, including for California residents.

One of the primary reasons a person is limited in the deductions they can claim for various expenses they might incur as a result of getting divorced has to do with the Tax Cuts and Jobs Act (TCJA). This fairly controversial piece of tax law was passed in 2017. It significantly changed many aspects of the tax code, including what could be deducted from individual taxes. 

State law doesn’t always align with this federal change to tax law. But in California, it does. Now, let’s take a look at the exceptions to the rule.

Are any divorce fees tax deductible in California?

Most attorney fees incurred during the divorce process typically qualify as personal expenses, which generally cannot be claimed as tax deductible. However, there are some exceptions. It’s usually a good idea to discuss whether any fees an attorney charges you might be tax deductible with them, as they often know. Here is how things break down:

Tax advice

Fees paid to attorneys in order to get tax advice can often be considered tax-deductible in California, at least in part, if the fees are related to a business you run. Similar services can also be tax deductible, including assistance resolving any tax issues you’re having or getting help preparing tax forms, as long as they’re related to your business. 

Importantly, fees incurred while receiving personal tax advice generally aren’t deductible on federal and California state taxes. In some cases, some of the time an attorney charges you will be tax deductible and some won’t be if they’re helping both with your personal and business taxes. In such cases, discuss the issue with your attorney to get a written breakdown of which charges are deductible. 

Business income and operation

Fees incurred getting legal help so you can collect fees and those directly related to operating a business are often tax deductible. This includes fees related to generating farm income and paying farm expenses. 

Some of these fees may be incurred as a result of your divorce if you operate a business, as divorce can often have significant business implications. 

What about estate planning?

Divorce can often affect your estate planning in California, sometimes quite radically. In the past, estate planning fees were often tax deductible. But the TCJA changed this. 

Outdated sources you find on the internet may discuss the older rules, which made some estate planning fees eligible as an itemized deduction. Presently, however, this isn’t true. Experts do note that many provisions of the TCJA sunset at the end of 2025. This means that some deductions will return unless renewed tax law is introduced to continue to prevent them from being claimed.

The TCJA has been controversial, especially in how it affected taxes relating to divorce in California and elsewhere in the U.S. It remains to be seen which elements of it may or may not stay in place. It’s possible that the rules could change even sooner if new tax laws are passed.

Suggested: How 2017's Tax Bill Changed How Alimony Is Taxed

References