What types of legal fees can I claim as deductions on my tax return?
You might be able to claim a deduction on your tax return for legal fees you paid during the tax year if the fees were related to certain things.
The list below describes some of the things for which you might be able to claim legal fees as a deduction on your tax return:
You might be able to claim legal fees related to income tax preparation in the following scenarios:
- Fees you paid 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, type Miscellaneous Deductions in the Find tool located at the upper-right area of your TurboTax page. The Find tool 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 (e.g., benefits, 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 are 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, 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 purchase capital property (e.g., boat, fishing materials) are not deductible. Instead, these fees may be added to the costs of the capital property (i.e., capital cost allowance [CCA]).
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 are not deductible. Similarly, for the person who must pay support, legal fees paid to establish, negotiate or contest the amount of support payments is not deductible.
To claim legal fees related to support payments, type Miscellaneous Deductions in the Find tool located at the upper-right area of your TurboTax page. The Find tool will take you to the page where you can claim this legal expense.
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, type Miscellaneous Deductions in the Find tool located at the upper-right area of your TurboTax page. The Find tool 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 purchase a rental property cannot 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 that you purchased a property worth $200,000–$50,000 for the land and $150,000 for the building. 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 under Claims for Dependants. But first you need to add your adopted child as a dependant on your tax return and then use the Find tool and type Claims for Dependants to go to the page that can take you to the Adoption Expenses step.
To claim adoption expenses such as legal fees and administrative expenses, first, you need to add your adopted child as a dependant on your tax return. Second, type Claims for Dependants in the Find tool located at the upper-right area of your TurboTax page. Follow the instructions on the page to get to where you can claim all expenses related to adoption.