Part 4: Tax-Time Series- Estate Planning Services May Be Tax Deductible

Did you know that if you met with an estate planning attorney within the past year, some of your legal fees may be tax deductible?

In both Merians v. Comm’r, 60 TC 187 (1973) (involving estate planning using an irrevocable trust) and Wong v. Comm’r, TC Memo. 1989-683 (1989) (involving estate planning using a revocable trust), the Tax Court ruled that twenty percent (20%) of a non-itemized estate planning bill was deductible as tax advice under Section 212(3).
Attorney’s fees are deductible only to the extent they exceed 2% of the taxpayer’s adjusted gross income and they are subject to a phase out when the adjusted gross income exceeds a certain amount.  They cannot be taken into account in computing the alternate minimum tax.  In order to take advantage of the 2% rule, the client should pay all deductible legal fees in one year.
Attorney’s fees are deductible to the extent they are incurred:

  • to produce income that is includable in the recipient’s gross income; 
  •  for the management, conservation, or maintenance of property held for the production of income;
  •  in connection with the determination, collection, or refund of any tax;
  • to the extent they are paid for tax planning advice.

Expenses, to be deductible under section 212, must be “ordinary and necessary.” Thus, such expenses must be reasonable in amount and must bear a reasonable and proximate relation to the production or collection of taxable income or to the management, conservation, or maintenance of property held for the production of income. When deductible, attorney’s fees are treated as “miscellaneous itemized deductions.”

Here at The Fairfax and Fredericksburg Elder Law Firms of Evan H. Farr, P.C., we suggest that 20% of the total fees that you paid to our firm can appropriately be considered deductible tax advice.  If you haven’t yet had the chance to meet with an Estate Planning Attorney, make an appointment at for a consultation at The Farr Law Firm by calling us at 703-691-1888.

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About Evan H Farr, CELA, CAP

Evan H. Farr is a 4-time Best-Selling author in the field of Elder Law and Estate Planning. In addition to being one of approximately 500 Certified Elder Law Attorneys in the Country, Evan is one of approximately 100 members of the Council of Advanced Practitioners of the National Academy of Elder Law Attorneys and is a Charter Member of the Academy of Special Needs Planners.