You might be able to claim a deduction on your tax return for legal fees you paid during the tax year. The following list describes some instances in which you may be eligible to claim legal fees as a deduction on your tax return:
Income tax preparations
You might be able to claim legal fees related to income tax preparation in the following scenarios:
- Fees you paid to legal professionals for advice or assistance in responding to a request by the CRA to review your income, deductions, or credits, or
- Fees you paid to legal professionals to represent you to object to (or appeal) an assessment or decision under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan (CPP), or Quebec Pension Plan (QPP)
To claim legal fees related to preparing your tax return, select the Find tool in TurboTax and search Miscellaneous Deductions. This will take you to the page where you can claim this legal expense.
You might be able to claim legal fees to collect (or establish a right to collect) salary, wages, or other amounts related to employment (such as benefits or vacation pay) that are owed to you, even if such actions are unsuccessful in the end.
Any award to cover legal fees or expenses (i.e., via court order or settlement) will reduce the amount of legal fees you can claim by that amount.
If you're self-employed, you might be able to claim legal and accounting fees paid to professionals (for advice, services, and consulting) for services related to the following:
- Keeping records or preparing and filing income tax and GST/HST returns
- Filing an objection or appeal to an assessment for income tax, CPP or QPP, or employment insurance (EI) premiums
Legal and other fees incurred to buy capital property (for example, a boat or fishing materials) aren't deductible. Instead, these fees may be added to the costs of the capital property (i.e., capital cost allowance).
Child support payments
You might be able to deduct legal fees to support a claim to make child support payments non-taxable.
Legal fees paid to obtain a separation, divorce, or establish custody or visitation arrangements for a child aren't deductible. Similarly, for the person who must pay support, legal fees paid to establish, negotiate, or contest the amount of support payments aren't deductible.
To claim legal fees related to support payments, select the Find tool in TurboTax and search Miscellaneous Deductions. This will take you to the page where you can claim this legal expense.
Retiring allowance or pension benefit
You might be able to deduct legal fees if you paid such fees to collect (or establish a right to collect) a retiring allowance or pension benefit (up to the amount of the retiring allowance or pension income you received that year, but less any amounts transferred to an RRSP or registered pension plan).
In some circumstances, these legal fees may be carried forward for up to seven years.
To claim legal fees related to collecting retiring allowance or pension, select the Find tool in TurboTax and search Miscellaneous Deductions. This will take you to the page where you can claim this legal expense.
If you own rental property, you might be able to deduct the following types of accounting and legal fees:
- Fees for services rendered to prepare leases or collect overdue rents, to cover bookkeeping services, audits of your books and records, and preparation of financial statements.
- Fees for advice and help to prepare the tax return and any related information returns required related to the operation of the rental property.
Legal fees paid to buy a rental property can't be deducted from gross rental income. However, these legal fees may be added to the cost of the land, the building(s), or both.
For example, let's assume you purchased a property worth $200,000–$50,000 for the land and $150,000 for the building. The legal fees are $10,000.
In this case, a proportionate split of the fees between land and building ($2,500 for the land, $7,500 for the building) increases the cost of the land to $52,500 and the building to $157,500. Therefore, when you sell the rental property, the capital gain or loss will be calculated based on the values that include the legal fees ($52,500 and $157,700).
Legal fees incurred during an adoption period may be claimed against income, to the maximum amount allowable for each adopted child.
Legal fees for adoption expenses can be claimed in the Deductions section of TurboTax under Claims for Dependants.
To claim adoption expenses such as legal fees and administrative expenses, you first need to add your adopted child as a dependant on your tax return. Next, select the Find tool in TurboTax and search Claims for Dependants. Follow the instructions to reach to step for claiming all expenses related to adoption.