Home » Aron Govil- Can I Deduct Legal Fees For Business Litigation From My Taxable Income?

Aron Govil- Can I Deduct Legal Fees For Business Litigation From My Taxable Income?

This is a question that is asked by business owners on a regular basis. The answer to this question is it depends says Aron Govil.

 There are a few things that you need to take into account when trying to determine if you can deduct your legal fees for business litigation from your taxable income.

  • The first thing you need to do is determine if the legal fees were incurred in order to earn business income. If the legal fees were incurred in order to defend or collect income, then you can likely deduct them from your taxable income. However, if the legal fees were incurred in order to establish or protect a capital asset, then you may not be able to deduct them.
  • You also need to consider whether the legal fees were paid for services that were rendered or for expenses that were incurred. If the legal fees are for services that were rendered, then you can likely deduct them from your taxable income. However, if the legal fees are for expenses that were incurred, then you may not be able to deduct them.
  • There are a few other things you need to take into account when trying to determine if you can deduct your legal fees for business litigation from your taxable income. However, these are the most important things to consider. If you are unsure whether or not you can deduct your legal fees, it is best to speak with a tax professional. They will be able to help you determine if the legal fees are deductible and how much of them you can deduct from your taxable income.
  • Speak to an accountant to get a definitive answer. Business litigation can be expensive, so it’s important to know if you can recoup some of those costs come tax time!

Can I Deduct Legal Fees For Business Litigation From My Taxable Income?

This is a question that is asked by business owners on a regular basis. The answer to this question is it depends. There are a few things that you need to take into account when trying to determine if you can deduct your legal fees for business litigation from your taxable income explains Aron Govil.

  • The first thing you need to do is determine if the legal fees were incurred in order to earn business income. If the legal fees
  • When a business owner is involved in a lawsuit, it can be a lengthy and costly process. However, the bottom line is that the business owner will have to pay for legal expenses from his or her own pocket even though these costs are incurred because of an obligation to the company.
  • As you probably know, when your company-issued is for any reason you will most likely have to hire an attorney. The attorney will draft motions, respond to discovery requests and complaints filed by opposing counsel. You may also end up having to appear in court on some occasions; however, that depends on whether your attorney believes it will benefit your case (and therefore benefits you). If the case does not settle prior to trial then you may end up having to testify.

Regardless of the type of litigation, your business is involved in; unless it’s a “business tax” issue then you cannot deduct your legal fees from your taxable income. Why? Because the IRS has no provision to do so. Furthermore, if you are using personal funds to pay for legal representation on behalf of your business. Then you will be required to treat this expense as a capital loss – not an ordinary loss. Because the money used for operating costs of a business is deducted from revenue. While money lost due to an investment gone bad is treated under special rules says Aron Govil.

Don’t let this happen to you:

If you’re ever faced with a business lawsuit. The best course of action is to consult with an experienced business attorney. Who can help you understand your rights and obligations. You should also always keep in mind that litigation is costly. And it’s likely that you will have to pay for legal expenses from your own pocket. By doing so, you’ll be less likely to find yourself in a difficult financial situation. If the case does not resolve in your favor.

Conclusion:

Business litigation can be expensive. So it’s important to know if you can recoup some of those costs come tax time! Speak to an accountant to get a definitive answer says Aron Govil.

Remember, business owners can only deduct legal fees for business litigation from their taxable income. If the fees were incurred in order to earn income. If you’re unsure whether or not you can deduct your legal fees. It is best to speak with a tax professional. They will be able to help you determine if the legal fees are deductible. How much of them you can deduct from your taxable income. Good luck!