Deducting Legal Costs for Income Tax Purposes

It’s tax time again!  I often receive calls about whether legal costs are deductible from income for tax purposes at this time of year. The answer is – it depends.

If you started a court proceeding to obtain child support or to enforce a child support order, or if you had to defend a court proceeding to reduce child support, you are entitled to claim a deduction for your legal costs. You will have to obtain a letter from your lawyer confirming how much you actually paid for legal fees and disbursements (out of pocket expenses incurred by your lawyer) and when you paid. If there were other issues before the court at the same time, your lawyer will have to set out what percentage of your legal costs related to the application to obtain child support, enforce a child support order or to defend a claim for a reduction of child support.  You submit the letter with your income tax return to claim the deduction.

Unfortunately, if you are the one who is required to pay child support, you are not entitled to any deduction for defending a child support claim, defending enforcement proceedings or bringing an application to change or reduce child support.

Neither the payer or the recipient is entitled to any deduction for legal costs relating to spousal support claims.

For more information see Canada Revenue Agency’s interpretation bulletin IT-99R5.