Can I Deduct Estate Planning Fees?

December, 26 2023 by Steve Banner, EA, MBA

I wish you had asked this question in 2017. Up until that time, certain estate planning fees for individual taxpayers were deductible under the heading of Miscellaneous Itemized Deductions. For example, for the preparation of a trust, the portion of the lawyer’s fees that dealt with tax implications were deductible. In these situations, the lawyer would normally identify the portion of his fees that were deductible. Up until the end of 2017, you would also have been able to deduct investment fees, tax preparation fees, and union dues. However, this all changed with the passing of the Tax Cuts and Jobs Act (TCJA) which is in effect for the tax years from 2018 through to 2025. This legislation made sweeping changes to the tax code and lowered most tax rates for individual taxpayers. At the same time, it also suspended or modified certain above-the-line expenses (amounts that are subtracted from income to arrive at adjusted gross income) such as those for alimony payments, moving expenses, and legal fees.

As noted above, the TCJA legislation made a series of significant changes to the U.S. tax code. The Act itself consisted of over 1,000 pages and touched upon numerous areas of the law. Most of the changes were effective from 2018 onwards and will remain in force until the last day of taxpayers’ 2025 tax year (December 31st for most people).

Although the TCJA made many legal fees paid by individual taxpayers nondeductible, it did not affect business taxpayers who paid legal fees as part of their business operations. For example, a business owner who consulted a lawyer about how to handle succession planning in his enterprise would be able to deduct the cost of the lawyer’s advice as a business expense.

This also has implications for Barry, a self-employed plumber who is having problems collecting payments from some of his customers. If Barry uses the services of his lawyer to send letters to his delinquent customers, he will be able to deduct these legal fees from his business income. On the other hand, if he pays a lawyer to prepare his will for him, no part of these personal fees will be deductible.

As the law currently stands for individual taxpayers – and as common sense would tell us - from the beginning of your 2026 tax year, you will be able to start deducting estate planning fees related to tax planning that you incur from that time onwards. But although what I have just said may sound quite logical in itself, there is no guarantee that this provision of the TCJA will expire at the end of 2025. Depending upon developments in the political sphere that may take place between now and the end of 2025, Congress may very well decide to extend some of the provisions of the TCJA into 2026 and beyond, while letting others expire as originally planned.

I wish I could provide you with a more satisfying answer to this quite simple question. But I hope the explanation above helps you to understand the ambiguous situation that we find ourselves in.

Right now, all I can say with any certainty is “No, you can’t deduct estate planning fees now, but you probably will be able to in the future. Maybe.” It’s all in the lap of Congress.