It is permitted to deduct legal fees under the Income Tax Act, but only in specific cases and you must ensure that you hold the correct documentation.

If you are using the services of an electronic filer (efiler), you must present the documentation to them prior to the tax return being filed. If you are filing your own return, either paper or electronic, you are required to retain the documentation for six years past the date of the last Notice of (Re)Assessment for that return.

For legal fees, acceptable documentation has been a letter from the lawyer/law firm, on letterhead, dated and signed by an authorized person, with the phrase “Received $____ from ____ during the year 20__ for legal services for the purpose of ____.” The purpose would be one of the various permitted claims. For example, “Obtaining, Collecting and/or Defending Support Payments Received/Receivable,” or “Obtaining, Collecting and/or Defending Wages due to Dismissal.”

Please note that if the payments cover several years, you must have the amounts broken by year.

Professional assistance is required for most claims. Please contact me if you need assistance in filing a tax return with this claim.