Legal fees for SS Disability

[Jan S]

Client paid $6,000 in attorney fees for SS disability benefits. 85% of SS benefits are taxable. Should he deduct all $6,000 on Schedule A or $5,100 (85%)?

[RitaB]

85%

Client paid $6,000 in attorney fees for SS disability benefits. 85% of SS benefits are taxable. Should he deduct all $6,000 on Schedule A or $5,100 (85%)?

5,100 and if I remember, it goes on line 23, subject to the 2% haircut.

[taxea]

Have the TP get a detailed statement from the atty that shows how much was for retention of income. You can't take an arbitrary amount.

[taxmom34]

attorney fees deductible up to amount of taxable income, so the 85% of social security that is taxable.

[Burke]

You should be able to consider the entire $6,000 as applicable to getting the SSI benefit, so 85% of that amount which is the taxable portion of benefit received would be deductible on Sche A (subj to 2% AGI reduction.) That's all these attorneys do as a rule.

[Jan S]

Thanks for the replies.

[BUSYBEE]

it should be the 6000.
the 85 is the just for the taxable part of SS
it will go on sch a line 28
if you look up the instructions for the line it used to product income which they did

[New York Enrolled Agent]

it should be the 6000.
the 85 is the just for the taxable part of SS
it will go on sch a line 28
if you look up the instructions for the line it used to product income which they did

Perhaps you should read Rev Ruling 87-102. You might want to change your post - it is incorrect.

[taxmom34]

somewhere in my training many years ago, I remember reading that legal fees are deductible if for producing taxable income. so I interpret it to mean only up to the amount of taxable income. which in this case would be the 85% of ss

[Burke]

That is correct, and makes perfect sense. Same reasoning on investment advisory fees for taxable vs tax-exempt income.