Divorce-related legal fees may be tax deductible, but generally, only to the extent that they were incurred for the production or collection of taxable income. Section 212 of the Tax Code, which authorizes a deduction for divorce-related legal fees, is very limited. And, the tax deduction for divorce-related legal fees is available only to the extent that the fees exceed 2% of a taxpayer’s adjusted gross income. Chapter 7 of my book, Frumkes & Vertz on Divorce Taxation, deals with divorce-related legal fees.
In plain terms, spouses can deduct divorce-related legal fees that were incurred for generating or collecting taxable alimony or spousal support, but not for defending against it. A federal appeals court made this clear years ago in Hunter v. U.S., 219 F.2d 69 (2d Cir.1955). Fees that are incurred to oppose an alimony claim or reduce one’s alimony obligation are not tax-deductible. On the other hand, legal fees incurred for obtaining an increase in taxable alimony, or defending against a decrease, are tax-deductible.
Child support is not taxable income, so legal fees for generating, collecting or defending child support are not tax-deductible. Property distribution in a divorce is generally not treated as taxable income, so divorce-related legal fees are not tax deductible. There is one exception, however. Fees incurred by an alternate payee to obtain retirement benefits by Qualified Domestic Relations Order are tax deductible.