Christine Doucet – February 2016
Tax Time – Certain legal fees are tax deductible
It’s that time of year again – tax time. Some Canadians will be pleasantly surprised to discover that the fees they paid to their family lawyer are tax deductible.
Line 221 of the CRA income tax return allows Canadians to deduct legal fees incurred in an effort to collect child or spousal support. Not all legal fees qualify. Payors of child or spousal support cannot deduct the legal fees that they incurred, nor can people deduct their fees incurred to divide matrimonial property or resolve a custody dispute.
Each February, MDW Law proactively sends letters to clients who qualify for the deduction. The letter breaks down the portion of the fees the client has spent on efforts to collect child or spousal support, as opposed to other aspects of his/her legal matter. The letter can be submitted as a receipt to CRA.
The following is a detailed list of the family law matters for which legal fees are tax deductible:
- To collect late support payments;
- To establish the amount of support payments from a current or former spouse or common-law partner;
- To establish the amount of support payments from the legal parent of a child (who is not a current or former spouse or common-law partner) where the support is payable under the terms of a court order; or
- To try to get an increase in support payments.
An Information Bulletin on the CRA website entitled “Line 221 Interest Charges and Carrying Expenses” provides more information: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns206-236/221/menu-eng.html.