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Remember Legal Fee Tax Deductions!

Richard B. Johnson

Co-Founder + Partner
March 5, 2021

As tax time nears for all of us, it is important to remember to take advantage of any available deductions – every bit helps!

In some circumstances, your legal fees for an employment matter can be tax deductible. For example, you may be able to claim deductions for the legal fees you paid in the year to “collect or establish a right to collect” the following items:

  1. Salary or wages;

  2. Other amounts that must be reported in employment income even if not directly paid by an employer (you have to reduce your claim by any amount awarded to you for fees or reimbursement for legal expenses, however); and

  3. A retiring allowance or pension benefit (up to the retiring allowance or pension income you received in the year less any part of those amounts transferred to an RRSP or registered pension plan).  There is also the right to carry forward legal fees you cannot claim in the year, for up to seven years.

We note that there is no substitute for thorough tax and financial advice on your specific circumstances, but we hope that this helps a bit at tax time!

See here for more information:

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-23200-other-deductions.html#toc2

and

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-229-other-employment-expenses/salaried-employees/accounting-legal-fees.html