Are Divorce Legal Fees Tax Deductible in Canada? An Alberta Guide

If you are paying a family lawyer, it is natural to ask whether any of it can be claimed on your tax return. The honest answer is that it depends on what the fees were for and on federal tax rules, which an accountant is best placed to apply to your facts.

This article does not try to say which fees are deductible. It helps you sort your costs into clear categories and keep the records an accountant will ask for.

This article covers the law of Alberta.

Why there is no simple yes or no

A family law file often includes several different things: getting a divorce, dealing with parenting, setting or changing support, enforcing an order, and dividing property. Legal fees for these purposes may be treated differently for tax. A single invoice can mix them together.

Ask your lawyer to describe the work on each account in plain terms, and to separate work on different issues where that is possible. That makes it easier for your accountant to see what the fees were for.

Sorting your costs

Start by listing the different kinds of costs you may have paid or received. The Court of King's Bench handles divorce, property division, support and parenting.

Costs awards and your lawyer's fees

A costs award is not the same as your own legal bill. A successful party is generally entitled to a costs award against the unsuccessful party, although the court has discretion and costs are not automatic. The court may order reasonable and proper costs or any amount it considers appropriate, which can include a lump sum.

If one party is owed costs and also owes costs, the court may net the amounts by deduction or set-off. The reasonable and proper costs exclude, unless the court orders otherwise, the costs of dispute resolution processes under rules 4.16 and 4.18 (unless there was serious misconduct) and expert fees for investigations or for assisting at a trial or streamlined trial. So the amount a court awards may be quite different from what you actually paid your lawyer.

A party entitled to costs who wants or must have them assessed prepares a bill of costs in Form 44, itemizing fees, disbursements and other charges. Keep a copy of any bill of costs, as it can help show what was claimed.

Unless the court orders otherwise, a costs award for an application you had notice of may be made once it is decided, and for a trial after judgment or a final order is entered. If no costs award or assessment order is made when the matter is decided, either party may ask an assessment officer for an assessment appointment date. In deciding costs, the court may look at each party's degree of success and at conduct that shortened or lengthened the action.

Records worth keeping

• Every lawyer's invoice, with the work described and the dates.
• Receipts for court filing fees, and any fee waiver approval.
• Any court order that mentions costs, and proof you paid or received it.
• Settlement documents where one party agrees to pay costs.
• Separation or divorce documents that show what the proceeding was about.

If you received a fee waiver, it covers court filing fees only, so you may still have other costs to track.

If you apply for a fee waiver, you complete the Application for Fee Waiver and Statement of Finances form and submit it at the court where you plan to file. You cannot get a fee waiver if you are representing a business or an estate. Keep a copy of the form and the proof of income you gave with it, such as your most recent tax return or notice of assessment, or pay stubs for the last 3 months.

What to do next

• Gather your invoices and receipts into one folder, sorted by purpose.
• Ask your lawyer to explain on each account what issue the work related to.
• Bring the folder, your court orders and any settlement agreement to an accountant or tax professional.
• Ask the accountant which of your costs may be claimed and for which tax year.
• Do not assume a friend's tax treatment will apply to you.

Your family lawyer can confirm what your costs related to in the case, and your accountant can confirm the tax treatment. Both are worth consulting before you file.

Frequently asked questions