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Income Tax and Lawyers Fees

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  • Income Tax and Lawyers Fees

    I am wondering if anyone know what % of lawyers fees are tax deductable for the pupose of obtaining child support.

    I have spent a considerable sum of money on lawyers fees and have all of the documentation but am not sure what % I am able to claim.

    Any ideas?

  • #2
    This is what CRA has to say regarding legal fees

    Line 232 - Legal fees You can claim a deduction for legal fees on line 232 in any of the following situations:

    •you paid fees (including any related accounting fees) for advice or assistance in responding to us when we reviewed your income, deductions, or credits for a year or in objecting to or appealing an assessment or decision under the Income Tax Act, the Unemployment Insurance Act, the Employment Insurance Act, the Canada Pension Plan Act, or the Quebec Pension Plan;
    •you paid fees to collect (or establish a right to) a retiring allowance or pension benefit. However, you can only claim up to the amount of retiring allowance or pension income you received in the year, minus any part of these amounts transferred to a registered retirement savings plan or registered pension plan. You can carry forward, for up to seven years, legal fees that you cannot claim in the year;
    •you collected late support payments;
    •you established the amount of support payments from your current or former spouse or common-law partner;
    •you established the amount of support payments from the natural parent of your child (who is not your current or former spouse or common-law partner) where the support is payable under the terms of an order;
    •you sought to obtain an increase in support payments; and
    •you sought to make child support non-taxable.
    You can also deduct on line 229 legal fees you paid to collect (or establish a right to) salary or wages. It is not necessary for you to be successful; however, the amount sought must be for salary or wages owed. You must reduce your claim by any amount awarded to you in respect of those fees or any reimbursement you received for your legal expenses.

    Under proposed legislation you can deduct legal fees you paid to collect or establish a right to collect other amounts that must be included in employment income even if they are not directly paid by your employer. (These fees must be deducted on line 229.)

    You have to reduce your claim by any award or reimbursements you received for these expenses. If you are awarded the cost of your deductible legal fees in a future year, you will have to include that amount in your income for that year.

    For more information on other legal fees you may be able to deduct, get IT99R5, Legal and accounting fees.

    You cannot claim legal costs you incurred to:

    •get a separation or divorce;
    •establish custody or visitation arrangements of a child;
    If you pay support, you cannot claim legal costs incurred to establish, negotiate, or contest the amount of support payments.

    Completing your tax return
    On line 232 or line 229, claim the allowable amount of legal fees.

    If you are filing a paper return, do not include your receipts but keep them in case we ask to see them. If you are filing electronically keep all of your documents in case we ask to see them.

    Forms and publications
    •General Income Tax and Benefit Package - Guide, return and schedules
    •IT99R5, Legal and accounting fees
    •Pamphlet P102, Support Payments


    • #3
      AtALoss: Thanks for this helpful information.

      FYI - during the past 10 years I have spent tens of thousands of dollars on legal fees concerning child support for my son. It is only recently that I learned that at least some of this is tax deductibe.

      Does anyone know as of this time how many years back I can go to have the relevant fees factored in and a re-assessment done?

      Next, if that time frame is less than ten years is there some way that I can appeal and seek a longer term of up to ten years? (e.g. on humanitarian and health grounds).

      Thanks for the great information on this site!

      Here is another question about money and legal fees. At this time I am representing myself and it can be time-consuming. In my own profession I can easily receive $200 per hour in consulting fees.

      My ex (the support payor) is refusing to provide last year's tax return as legally obliged to do. Can I tell my ex that I plan on taking the matter to court and will be charging $200 an hour for my preparation time in completing relevant documents, gathering evidence identifying my ex's refusal to cooperate on the matter (e.g. printing/copying extensive e-mail correspondence)?.... and that I will be seeking that the court order my ex to pay those costs to me? Thanks.


      • #4
        You won't be able to charge your time at your hourly rate when seeking costs.

        Also, the Income Tax Act provides that you can go back 10 years and have returns reassessed to deduct legal fees. Once you have settled, ask your lawyer to provide you with a letter estimating the % and amount of your legal fees that relate to deductible activities. Provide that letter to the CRA and you will have your reassessment to deduct legal fees.


        • #5
          Letter from the lawyer

          Thanks for the speedy replies.

          Does the % of lawyers fees for the purposes of establishing child support have a standard % that the lawyer attaches? OR does the lawyer write a letter and impute as value that they see as fair?

          I have all of my bills - but it is hard to determine how much was for what item - cs, equalization etc. Also I have had two different lawyers - one for preliminary and one more experienced for settling the issues.

          Thanks for the detailed response At a Loss


          • #6
            Here is some thought on how costs are awarded.

            When you request costs the judge is going to look at all items and se if they are relavant. ie Did you have to travel etc to appear in court? yes then they may include that in your costs. charging for you own personal time will be more dicey are you a lawer? Were your skills relavant say to the presentation of evidence? just because you feel you should be reimbursed for you time and inconvienence may not be reasonable to a judge. Bottom line in your request for costs the items should be relavent and documented.

            Some one else asked a few weeks ago how costs are awarded. there are basically 3 levels, Partial indemnity, substantial, and full indemnity. Accordingly what you would recieve of your request is partial 60%, substantial 80% and full 100%. That is up to the judge to do as he feels. Much of that decision will be based on extenuating or unusual circumstance. Average is Partial to sub. Now having said that a judge can award costs without a formal request. In my case it went to appeal. The request for appeal was heard then turned over to the court of appeals. (this appeal was not my action) Anyway we did not make formal request for costs but the appeal judges gave an amount despite. BTW it was dismissed So likely a factor.

            So costs can vary and swing either way. Just be reasonable on your request.


            • #7
              CRA Adjustments

              The form that you would ned to make any adjustments is
              t1-adj.-08e T1 Adjustment Request.
              Sorry didnt include earlier but wanted to look it up to make sure I had it correct.

              This form allows you to request an adjustment (+or-) to ANY line on your income tax form as well if you were entitled but didnt claim an item such as a GST rebate.

              So you can go back 7 to 10 years for those legal fees but beware not everything is allowed. For example if you area payor and sought a reduction of support the adjustment or claim for fees is not allowed. (unfair) but if you were establishing support it is allowed. So a fine line. Also please note that say you have a bill with your lawyer for 10,000 the court awarded you 6,000 in costs CRA requires you to deduct the award and you are only allowed to claim $4,000 in legal expenses. Fair enough as you may have been reimbursed some.

              No I dont work for CRA thankfully. Just going this route too.


              • #8
                Income Tax Line 232

                Okay. I am a little confused. The line I would claim for lawyers fees is line 232 on my income tax.

                AT A LOSS you mentioned that I could claim"to establish the amount of support payments from your current or former spouse or common-law partner". So what I have from my lawyer is one big whopper of a bill that lumps everything together.......equalization, custody etc to the tune of 18K + over four years. How do I know how much I can attribute to the cost of establishing child support? Do the lawyers write a letter stating how much they are attributing to each area?

                I was awarded 1.00 for child support and no court costs.


                • #9
                  As said above already, you get a letter from your estimating the % of your fees that relate to the deductible amounts.


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