Submitted By: Evelyn
Answered: July 8, 2016 9:18 am

I received a lump-sum disability payment from Social Security for 2012 through 2015. I paid $6,000 in attorney’s fees to help with this matter. Can I deduct the fees?

Attorney’s fees to produce taxable income are deductible. Since part of the disability payments is included in gross income, part of the attorney’s fees is deductible. However, you treat¬†them as a miscellaneous¬†itemized deduction, which means:

  • You must itemize to write them off
  • Only itemized deductions in excess of 2% of adjusted gross income are deductible
  • Miscellaneous itemized deductions are not deductible for purposes of the alternative minimum tax

You’ll have to run the numbers to see whether you actually get any tax benefit from deducting attorney’s fees.

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Tax Glossary

Unrecaptured Section 1250 gain

Long-term gain realized on the sale of depreciable realty attributed to depreciation deductions and subject to a 25% capital gain rate.

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