When can you deduct legal fees from your taxes?

When evaluating the deductibility of costs related to obtaining spousal or child support payments, CRA used to distinguish between costs related to “establishing a right” vs. costs related to enforcing a “pre-existing right”.

Child support was always considered a pre-existing right of the child, based on the requirement contained in provincial and federal legislation that parents are obligated to financially support their children. Therefore, legal expenses incurred to secure an award of child support were always deductible. Because the right to support is “pre-existing” when it is contained in a court order or signed agreement, legal expenses incurred to enforce the terms of spousal or child support contained in an order or agreement were similarly deductible.

From the payor’s perspective, you cannot claim legal costs you incurred in order to negotiate, or contest child support or spousal support. These costs are considered personal, or living, expenses. Legal expenses relating to custody and access are not deductible.

Although they didn’t use to be, at present, the legal costs of establishing spousal support and seeking an increase in child or spousal support are deductible. Previously, the costs of establishing spousal support were not deductible because CRA didn’t characterize spousal support as a “pre-existing right” in the same manner as child support.

Since most court cases involve many issues, some of which result in legal costs which are deductible, and some of which do not, you will need provide CRA with evidence as to what percentage of your legal fees are related to deductible expenses.

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