Claiming legal fees on income tax

H

Helpmyspouse

New member
Never thought to do this but I got a letter from my lawyer confirming the total cost of my legal fees for the taxation year and it states that 50 per cent of those fees were spent towards child support negotiations. Looking for feedback on whether claiming legal fees like these on income tax is a good thing to do. I did a scenario on turbo tax and if I claim this I get a refund so there is a monetary benefit.
 
I hesitate for only one reason. The legal fees statement from my lawyer just gives a total amount. But my concern is that if revenue Canada asks to see a detailed item line statement my lawyer will charge me big bucks for this. He charges 450 an hour! . I'm already at over 120,000 in legal fees. I want to avoid fees where I can. In this case the refund amount would not be worth it. I know its a risk. I need to think about it some more.
 
if the lawyer states in a letter that 50% was for the CS legal fees that may be enough.

I would do it and if CRA disallows it then you can decide where to go from there. Its not like they will fine you or anything. They will either disallow or ask for more detailed statement.
 
If the fees are specifically for you to get CS or section 7 paid then it’s allowable. If it’s to get your amount changed then it’s not
CRA told me only a recipient of CS can claim
 
Helpmyspouse said:
I hesitate for only one reason. The legal fees statement from my lawyer just gives a total amount. But my concern is that if revenue Canada asks to see a detailed item line statement my lawyer will charge me big bucks for this. He charges 450 an hour! . I'm already at over 120,000 in legal fees. I want to avoid fees where I can. In this case the refund amount would not be worth it. I know its a risk. I need to think about it some more.
Click to expand...

So claim it and see if CRA asks for more details or not. If they do, then you can decide if it's worth it to pursue.

I hope that a lawyer's office knows how to prepare their bill to be acceptable to CRA. If not, then you could ask how much it would be for their office to prepare one, which may cost less than the lawyer's hourly rate to do.

Don't just go leaving potential refund with CRA unless absolutely necessary.
 
Just wanted to jump in on this conversation as I'm reading CRA guidelines.
It looks like the support PAYOR is unable to deduct legal fees, where-as the support RECIPIENT is able to claim a variety of legal fees.

Looks like CRA is even one-sided just like the family law courts. An example from my interpretation of the CRA rules:
If the payor is paying too much and has legal fees to bring it back to the proper amounts, you can NOT apply for CRA tax credits. But if recipient demands more money (even unjustly), they can rack up all the deductions with CRA they want! Perhaps I'm wrong on my interpretation of the rules quoted below, but if not I guess I can't really be all that surprised!

Reference:
https://www.canada.ca/content/dam/cra-arc/formspubs/pub/p102/p102-17e.pdf

"As the payer, you cannot claim legal and accounting fees on line 220, 221, or 232 incurred to:
■ get a separation or divorce;
■ establish, negotiate, or contest the amount of support payments; or
■ establish child custody or visitation rights. "

"As the recipient, you can deduct, on line 221 of your tax return, legal and accounting fees incurred to:
■ collect overdue support payments owing;
■ establish the amount of support payments from your current or former spouse or common-law partner;
■ establish the amount of support payments from the legal 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 a court order; or
■ try to get an increase in support payments."
 
With regards to CRA if you are the support payer you are screwed. If you are male AND paying support = double screwed... Check out their "Female Presumption Rule"...

I wonder if it would make a difference having you SA or court order worded so that both parents are both payers AND recipients, they way you have to have it so that either can claim the Eligible Dependent Credit?
 
With regards to spousal support.... it is tax deductible for payor and is fully taxable to recipient.

With regards to legal fees - as a recipient my legal fees were mostly deductible as they were to a) negotiate support agreement and b) to defend the support agreement.

If you emphasize 'payor and recipient' as opposed to 'mother and father' that would be helpful. If you have a lawyer who has not done this then have the lawyer (at their cost) correct the agreement (and consider getting another lawyer who is living in 2018).

Naturally, I claimed everything I was entitled to claim. Why pay CRA more than you have to? Had I been the payor and my ex the recipient same rules apply. There is no male or female bias.
 
failed@life said:
I wonder if it would make a difference having you SA or court order worded so that both parents are both payers AND recipients, they way you have to have it so that either can claim the Eligible Dependent Credit?
Click to expand...


There absolutely is proper wording that CRA likes to see before they will share out the tax benefits to parents who have 50-50 access and use the offset CS system.


Lawyers and judges don't generally have a good handle on it, so it doesn't get used in agreements and court orders, so once you get denied by CRA, you have to get a motion to change done to alter the wording to make CRA happy.
 
Rioe said:
There absolutely is proper wording that CRA likes to see before they will share out the tax benefits to parents who have 50-50 access and use the offset CS system.


Lawyers and judges don't generally have a good handle on it, so it doesn't get used in agreements and court orders, so once you get denied by CRA, you have to get a motion to change done to alter the wording to make CRA happy.
Click to expand...


Pretty sad state of affairs if lawyers who are practicing family law are not up-to-speed on this. All they need to do is update their templates (which many use for SA and Orders). Sheesh... and they command 400/hr hour... disgusting really.
 
I have been claiming legal fees for the past 7 years. The first two I just handed my accountant the itemized legal bills my lawyer had invoiced me and let my accountant add it up. Rev Can asked for a letter from my lawyer to back it up and now that’s all they want each year. I get a refund every year but doesn’t really benefit me or the kids but goes directly to legal bills that I can’t keep up with anymore.
 
You must log in or register to reply here.
Back
Top